Engineering Fundamentals: Chapter 20
An Introduction to Engineering
1. Visual aids that show the flow of costs and revenues over a period of time are known as
a. cash flow diagrams.
b. cost – revenue diagrams.
c. Venn diagrams.
d. business plans.
Analysis:
2. The interest that would be paid only on the initial borrowed or deposited amount is
a. initial interest.
b. simple interest.
c. compound interest.
d. present value interest.
Analysis:
3. When the interest paid on the initial principal also collects interest, this is called
a. initial interest.
b. simple interest.
c. compound interest.
d. present value interest.
Analysis:
4. If you deposit $100 into an account that pays 5% APR compounded annually, what would be
the value in the account after 30 years?
$________
5. If you deposit $100 into an account that pays a fixed rate compounded annually, what is the
fixed rate if there’s $432.19 in the account after 30 years?
________%
6. If you deposit $5,000 into a 6-month CD (certificate of deposit) that pays 7.5% APR
compounded annually, what is its value at maturity?
$________
7. If you take out a $15,000 student loan on the first day of September, and promise to pay 6%
APR compounded annually, how much interest would you pay if you repay the loan at the end of
the following May?
$________
8. If you deposit $100 into an account that pays 5% APR compounded semiannually, what would
be the value in the account after 30 years?
$________
9. If you deposit $100 into an account that pays 5% APR compounded quarterly, what would be
the value in the account after 30 years?
$________
10. If you deposit $100 into an account that pays 5% APR compounded monthly, what would be
the value in the account after 30 years?
$________
11. If you deposit $100 into an account that pays 5% APR compounded weekly, what would be
the value in the account after 30 years?
$________
12. If you deposit $100 into an account that pays 5% APR compounded daily, what would be the
value in the account after 30 years?
$________
13. If you deposit $100 into an account that pays an interest rate that compounds quarterly, what
is the interest rate if the value in the account after 30 years is $444?
________%
14. If you deposit $100 into an account that pays 5% compounded quarterly, how many years
will it take to reach a value of $444?
________ years
15. If you deposit $5,000 into a 6-month CD (certificate of deposit) that pays 7.5% APR
compounded quarterly, what is its value at maturity?
$________
16. If you take out a $15,000 student loan on the first day of September, and promise to pay 6%
APR compounded annually, how much interest would you pay if you repay the loan at the end of
the following May?
$________
17. An initial deposit of $500 earns 8% interest (APR), compounded quarterly. How much will
be in the account at the end of 10 years?
$________
18. A credit card charges interest at a rate of 21% per year, compounded monthly. If a senior in
college charges her last tuition bill of $4500 and intends to pay it 3 years later (after she gets a
high-paying engineering job), how much will she have to pay?
$________
19. The stated or quoted interest rate is called the effective interest rate, and the actual earned
interest rate is called the nominal interest rate.
20. If you put away a fixed amount each month, at 10% APR compounded monthly, in order to
have $5000 in 3 years, how much will you have paid during that time?
$________
21. Although there are many types of these, they are basically loans that investors make to
government or corporations in return for some gain. What are they?
a. short-term loans
b. long-term loans
c. IOUs
d. bonds
Analysis:
22. When a bond is issued, it will have
a. an issue date, a maturity date, and an interest rate.
b. a maturity date, a par value, and an interest rate.
c. an issue date, a par value, and an interest rate.
d. an issue date, a maturity date, and a par value.
23. The par value of a bond is
a. the amount originally paid for the bond.
b. the amount that will be repaid at maturity date.
c. all of the above.
d. none of the above.
Analysis:
24. The percentage of par value that is paid to the bond holder at regular intervals is known as
a. par rate.
b. par dividend.
c. interest rate.
d. annuity payment.
Analysis:
25. The Straight Line and the Modified Accelerated Cost Recovery System (MACRS) are
examples of
a. accounting schemes.
b. depreciation methods.
Engineering Fundamentals: Chapter 20
An Introduction to Engineering
c. investment strategies.
d. dance steps.
Analysis:
26. In engineering, the term that refers to the sum of all costs that are associated with a structure,
a service, or a product during its life span is
a. life-cycle cost.
b. life-span cost.
c. sustainability cost.
d. total cost.
27. You have taken out a mortgage for a new home in the amount of $250,000. You have agreed
to repay the mortgage in 15 years. What is your monthly payment if you agree to pay an interest
rate of 6.5% compounded monthly?
$________
28. What nominal rate, compounded monthly, would yield an effective rate of 10%?
________%