5points

1. You need P4,000.00 per year for four years to go to college. Your father invested P5,000.00 in
7% account for your education when you were born. If you withdraw P4,000.00 at the end of
17th,18th, and 20th
birthday, how much
will be left in the
account at the end
of the 21st year?

a. P4,000.00

b. P1,700.00

c. P3,400.00

d. P2,500.00

2. As labor productivity increases, which of the following shifts in the labor market should result,
ceteris paribus?

a. Supply of labor should shift to the right.

b. Supply of labor should shift to the left.

c. Demand of labor should shift to the left.

d. Demand for labor should shift to the right.

3. Automobile workers in Detroit who are unemployed because of imports of foreign automobiles
at the same time that job vacancies exist for coal miners in West Virginia would most likely be
classified as:

a. Seasonally unemployed.

b. Frictionally unemployed.

c. Structurally unemployed.

d. Cyclically unemployed.
4. It is the practice of almost all banks in the Philippines that when they grant a loan, the interest
for one year is automatically deducted from the principal amount upon release of money to a
borrower. Let us therefore assume that you applied for a loan with a bank and the P80,000 was
approved at an interest rate of 14% of which P11,200 was deducted and you were given a check
of P68,800. Since you have to pay the amount of P80,000 one year after, what then will be the
effective interest
rate?

a. 0.162

b. 0.1628

c. 0.163

d. 0.159

5. A steel mill estimates that one of its furnaces will require maintenance P20,000.00 at the end of
2 years, P40,000.00 at the end of 4 years and P80,000.00 at the end of 8 years. What uniform
semi-annual amounts could it set aside over the next eight years at the end of each period to
meet these requirements of maintenance cost if all funds would earn interest at the rate of 6%
compounded semi-annually?

a. P7,897.35

b. P6,897.35

c. P9,397.35

d. P8,897.35

6. The initial investment to buy an equipment of a proposed project to increase productivity is

$25,000 and this equipment will have a salvage value of $5,000 at the end of its expected life of
5 years. Increased productivity attributed to the equipment will amount to $8,000 per 5 year
after extra operating costs have been subtracted from the value of the additional production. If
MARR (Minimum Attractive Rate of Return) is 20%, compute the Present Worth Method (PW)
using the six (6) methods for making Economy Studies.

a. 934.29

b. 932.17

c. 938.15

d. 937.76
7. The initial investment to buy an equipment of a proposed project to increase productivity is
$25,000 and this equipment will have a salvage value of $5,000 at the end of its expected life of
5 years. Increased productivity attributed to the equipment will amount to $8,000 per 5 year
after extra operating costs have been subtracted from the value of the additional production. If
MARR (Minimum Attractive Rate of Return) is 20%, compute the Annual Worth Method (AW)
using the six (6) methods for making Economy Studies.

a. 312

b. 314

c. 310

d. 320

8. A fixed capital investment of $10M and an estimated working capital of $2M is required for a
proposed manufacturing plant. Annual depreciation is estimated to be 10% of the fixed capital.
Determine the Minimum Payback Period if the annual profit is $2.5M

a. 4.5 years

b. 8.0 years

c. 4.8 years

d. 6.3 years

9. Suppose a supply disruption causes oil prices to rise, which leads to a recession in the Untited
States, and many Americans lose their jobs. Which of the following types of unemployment
would develop in the U.S economy?

a. Seasonal unemployment.

b. Structural unemployment.

c. Cyclical unemployment.

d. Frictional unemployment.
10. The initial investment to buy an equipment of a proposed project to increase productivity is
$25,000 and this equipment will have a salvage value of $5,000 at the end of its expected life of
5 years. Increased productivity attributed to the equipment will amount to $8,000 per 5 year
after extra operating costs have been subtracted from the value of the additional production. If
MARR (Minimum Attractive Rate of Return) is 20%, compute the Internal Rate of Return Method
(IRR) using the six (6) basic methods for making Economy Studies.

a. 0.2083

b. 0.2168

c. 0.2267

d. 0.1978

11. Which of the following should increase during the expansion phase of the business cycle?

a. Real GDP.

b. Unemployment.

c. Full employment.

d. All of the above.

12. The initial investment to buy an equipment of a proposed project to increase productivity is
$25,000 and this equipment will have a salvage value of $5,000 at the end of its expected life of
5 years. Increased productivity attributed to the equipment will amount to $8,000 per 5 year
after extra operating costs have been subtracted from the value of the additional production. If
MARR (Minimum Attractive Rate of Return) is 20%, compute the Explicit Reinvestment Rate of
Return (ERRR) using the six (6) methods for making Economy Studies.

a. 0.2125
13. The initial investment to buy an equipment of a proposed project to increase productivity is
$25,000 and this equipment will have a salvage value of $5,000 at the end of its expected life of
5 years. Increased productivity attributed to the equipment will amount to $8,000 per 5 year
after extra operating costs have been subtracted from the value of the additional production. If
MARR (Minimum Attractive Rate of Return) is 20%, compute the External Rate of Return
Method (ERR) using the six (6) methods for making Economy Studies.

a. 0.2083

b. 0.2315

c. 0.2168

d. 0.2297

14. A contractor has a job which should be completed in 100 days. At present he has 80 men on the
job and estimated that they will finish the work in 130 days. Of the 80 men; 50 are paid at $12 a
day, 25 at $18 a day and 5 at $25 a day. For each day beyond the original 100 days, the
contractor has to pay $250 liquidated damages. What is the "total wages" if 80 men will do the
job?

a. $ 145, 500

b. $ 152, 750

c. $ 140, 200

d. $ 150, 300
15. The initial investment to buy an equipment of a proposed project to increase productivity is
$25,000 and this equipment will have a salvage value of $5,000 at the end of its expected life of
5 years. Increased productivity attributed to the equipment will amount to $8,000 per 5 year
after extra operating costs have been subtracted from the value of the additional production. If
MARR (Minimum Attractive Rate of Return) is 20%, compute the Future Worth Method (FW)
using the six (6) methods for making Economy Studies.

a. 2320.7

b. 2324.8

c. 2326.9

d. 2322.5

16. An emmision charge:

a. Increases social marginal cost and thus induces lower output.

b. Increases private marginal cost and thus induces higher output.

c. Increases the difference between private and social costs.

d. Increases private marginal cost and thus induces lower output.

17. Given an annual usage of 8, 000 units, unit commodity cost $ 2, cost of placing an order of $ 5,
and annual inventory carrying cost of 30% of the average inventory;

What is the lot size?

a. 20 lots

b. 21 lots

c. 23 lots

d. 22 lots
18. A contractor has a job which should be completed in 100 days. At present he has 80 men on the
job and estimated that they will finish the work in 130 days. Of the 80 men; 50 are paid at $12 a
day, 25 at $18 a day and 5 at $25 a day. For each day beyond the original 100 days, the
contractor has to pay $250 liquidated damages.

What is the amount of the liquidated damages?

a. $ 7, 500

b. $ 6, 000

c. $ 32, 500

d. $ 25, 500

19. A fixed capital investment of $10M and an estimated working capital of $2M is required for a
proposed manufacturing plant. Annual depreciation is estimated to be 10% of the fixed capital.
Determine the Annual Rate of Return on Total Investment

a. 0.125

b. 0.2083

c. 0.1667

d. 0.25

20. A company must relocate one of its factories in three years. Equipment for the loading duck is
being considered for purchase. The original cost is P20,000, the salvage value after three years is
P8,000. The company's rate of return (i) on money is 10%. Determine the capital recovery rate
per year.

a. P5,625.38

b. P5,987.67

c. P5,578.35

d. P5,897.56
21. When there are positive externalities from the consumption of a good, the government should:

a. Subsidize consumption.

b. Tax producers of the good.

c. Enforce antitrust laws against producers of the good.

d. Make transfer payments to those who incur the externalities.

22. A fixed capital investment of $10M and an estimated working capital of $2M is required for a
proposed manufacturing plant. Annual depreciation is estimated to be 10% of the fixed capital.
Determine the Net Annual Profit

a. $3.0M

b. $2.5M

c. $1.5M

d. $2.0M

23. Machine cost = $15,000; Life = 8 years; Salvage Value = $3,000. What minimum cash return
would the investor demand annually from the operation of this machine if he desires interest
annually at the rate of 8% on his investment and accumulates a capital replacement fund by
investing annual deposits at 5%?

a. 4256.66

b. 2456.66

c. 2546.66

d. 5246.66

24. Governments usually build highways because it is difficult to exclude people who dont pay for
the highways from using those highways. What type of market failure is most likely involved?

a. Market power.

b. Government failure.

c. Public goods.

d. Inequity.
 25. A fixed capital investment of $10M and an estimated working capital of $2M is required for a
proposed manufacturing plant. Annual depreciation is estimated to be 10% of the fixed capital.
Determine the Capital Investment

a. $10M

b. $13M

c. $12M

d. $11M

2 points
1. If economic profits are earned in a competitive market:
a. More firms will enter the market.

2. A man inherited regular endowment of P100,000 every end of 3 months for 10 years. However,
he may choose to get a single lump sump payment at the end of 4 years. How much is this lump
sump if the cost of money is 4% compounded quarterly?
d. P3,702,939

3. If a single perfectly competitive firm raises its price above the market price:
a. It will not sell any output.

4. A machine having a first cost of P60,000.00 will be retired at the end of 8 years. Depreciation
cost is computed using a constant percentage of the declining book value. What is the total cost
of depreciation, in pesos, up to the time the machine is retired if the annual rate of depreciation
is 28.72%?
b. P56,000.00

5. A privately owned summer camp for youngsters has the following data for 12 week season:
Charge per camper $60/week
Variable Cost per Camper $40/week
Fixed Costs $24,000/season
Capacity 150 campers
What is the equivalent of 12 week/season into months?
c. 3 months
 6. A privately owned summer camp for youngsters has the following data for 12 week season:
Charge per camper $60/week
Variable Cost per Camper $40/week
Fixed Costs $24,000/season
Capacity 150 campers
What is the total number of campers that will allow the camp to just break-even?
c. BEV = 100

7. An upward-sloping supply curve a labor reflects:

a. The increasing opportunity cost of labor.

8. A person buys a piece of lot for P100,000 down payment and 10 deferred semi-annual payments
of P8,000 each starting three years from now. What is the present value of the investment if the
rate is 12% compounded semi-annually?
a. P143,999.08

9. Suppose a firm has an annual budget of $100,000 in wages and salaries, $50,000 in materials,
$20,000 in new equipment, #10,000 in rented property, and $20,000 in interest cost on capital.
The opportunity cost for stockholder investments is $30,000 per year, and there is an owner-
manager who could receive income of $50,000 by woring elsewhere. The firm earns revenues of
$210,000 per year. What is the economic profit for the firm described above?
d. Loss of $70,000

10. In monopoly and competition, a firm should expand production when:

c. Marginal revenue is above marginal cost.

11. Given an annual usage of 8, 000 units, unit commodity cost $ 2, cost of placing an order of $ 5,
and annual inventory carrying cost of 30% of the average inventory;
What is the total cost?
d. $ 16, 219

12. Markets that exhibits economies of scale over the entire range of market output:
b. Are natural monopolies.

13. Compared to a competitive market with the same cost and market-demand circumstances,
monopoly results in:
b. Higher prices and lower output.
14. A privately owned summer camp for youngsters has the following data for 12 week season:
Charge per camper $60/week
Variable Cost per Camper $40/week
Fixed Costs $24,000/season
Capacity 150 campers
What is the Contribution Margin per week?
d. $ 20/week

15. A shoe manufacturer produces a pair of shoes at a labor cost of $23.50. The fixed changes on
the business are $10, 125 a month and the variable costs are $2.50 a pair. If the shoes sell the
retailers for $48 a pair, how many pairs must be produced and sold each month for the
manufacturer to break and even?
c. 750

16. External costs are:

a. The difference between social costs and private costs.

17. The change in total revenue that results from a one-unit increase in the quantity of output sold
is:
d. Marginal revenue.

18. If a firm is producing a rate of output for which MC exceeds price:

c. The firm can increase its profit by decreasing output.

19. Which of the following conditions is a characteristic of a perfectly competitive market?

d. Products of all sellers in the industry are homogeneous.

20. The eventual decline in the MPP of labor can be attributed to:
a. The law of diminishing returns.

21. A machine costing P72,000 is estimated to have a book value of P40,545.73 when retired at the
end od 10 years. Depreciation cost is computed using a constant percentage of the declining
book value. What is the annual rate of depreciation in %?
b. 25

22. A privately owned summer camp for youngsters has the following data for 12 week season:
Charge per camper $60/week
Variable Cost per Camper $40/week
Fixed Costs $24,000/season
Capacity 150 campers
What is the profit for the 12-week season if the camp operates at 80 percent capacity?
a. Z = $4,800
 1 point
1. A merchant puts in his P2,000.00 to a small business for a period of six years. With a given
interest rate on the investment of 15% per year, compounded annually, how much will he
collect at the end of the sixth year?
c. P4,626.00

2. By condition of a will, the of P2,000.00 to a small business for a period of six years. With a given
interest rate on amounts to P50,000. When will the girl receive the money if the fund is invested
at 8% compounded quarterly?
c. 11.57 years

3. A deposit of P110,000 was made for 31 days. The net interest after deducting 20% witholding
tax is P890.36. Find the rate of return annually.
b. 0.1175

4. What will be the future worth of money after 12 months, if the sum of P 25,000 is invested
today at simple interest rate of 1% per month?
c. P28,000

5. If you borrow money from your friend at 12% "simpe interest", determine the P.W of $20,000
which is due at the end of 9 months.
b. $ 18, 348.62
6. A man expect to receive P 25,000 in 8 years. How much is that money worth noe considering
interest at 8% compounded quarterly?
b. P13,265.83
7. Tha amount of P12,800 in 4 years at 5% compounded quarterly is
b. P15,614.59
8. At what annual interest rate will increase an investment of $1400 by $600 in 9 years?
b. 0.0404
9. Find the present worth of a future payment of P 100,000 to be made in 10 years with an interest
of 12% compounded quarterly.
b. P30,655.68
10. A man borrowed P100,000 at the interest rate of 12% per annum, compounded quarterly. What
is the effective rate?
c. 0.1255
11. P1,500.00 was deposited in a bank account, 20 years ago. Today it is worth P3,000.00. Interest is
paid semi-annually. Determine the interest rate paid on this account.
c. 3.5%
12. The tag price of a certain commodity is for 100 days. If paid in 31 days, there is a 3% discount.
What is the simple interest paid?
d. 0.1614
13. Find the value of P if A = $600 , n = 15 years, and i = 5% compounded annually
a. P=$3,969.15
14. What rate of interest compounded annually is the same as the rate of interest of 8%
compounded quarterly?
d. 0.0824
15. Find the interest factor if A = $600 , n = 15 years, and i = 5% compounded annually
a. 10.379
16. Find the nominal rate which if converted quarterly could be used instead of 12% compounded
semi-annually.
b. 0.1183
17. Find the difference between the amount of $100 at simple interest and the compound interest
for 5 years at 5%.
a. 2.62
18. Find the effective interest rate if the nominal rate 12% compounded monthly with time interval
of one year.
a. 0.1268
19. A piece of machinery can be bought for P10,000.00 cash for P2,000.00 down and payments of
P750.00 per year for 15 years. What is the annual interest rate for the time payments?
d. 0.0461
20. What is the effective rate corresponding to 16% compounded daily? Take 1 year = 360 days.
a. 0.1735
21. What is the exact leap year interest earned on a $20,000 for a period of 29 days at 5% simple
interest?
c. 79.23
22. How long will it take the money to triple itself if invested at 10% compounded semi-annually?
c. 11.3 years
23. At 6%, find the capitalized cost of a bridge whose cost is P250M and life is 20 years, if the bridge
must be partially rebuilt at a cost of P100M at the end of each 20 years.
d. 245.3
24. Mandarin Bank advertises 9.5% account that yields 9.84% annually. Find how often the interest
is compounded.
c. Quarterly
25. What is the ordinary interest earned on a $20,000 for a period of 29 days at 5% simple interest?
c. 80.55
26. Between any two given rates of output, if marginal cost is less than average total cost, then
greater output means:
b. Average total cost must decline.
27. A bank charges 12% simple interest on a P300.00 loan. How much will be repaid if the loan is
paid back in one lump sum after three years?
a. P408.00
28. If you borrowed money from your friend with simple interest of 12%, find the present worth of
P50,000, which is due at the end of 7 months.
d. P46730
29. Find the interest factor if F = $5,000 , n = 3 years, and i = 8% compounded annually
d. 0.79383
30. How much must be deposited at 6% each year beginning of January 1, year 1, in order to
accumulate P5,000 on the date of the last deposit, January 1, year 6?
a. P717.00
31. An interest rate is quoted as being 7.5% compounded quarterly. What is the effective annual
interest rate?
a. 0.0771
32. A debt of P10,000 with 10% interest compounded semi-annually is to be amortized by semi-
annual payment over the next 5 years. The first due in 6 months. Determine the semi-annual
payment?
a. P1,295.05
33. In how many years will required for P2,000 to increase by P3,000 if interest is at 12%
compounded semi-annually?
b. 8
34. If P500 is invested at the end of each year for 6 years, at an effective annual interest rate of 7%.
What is the total amont available upon the deposit of the 6th payment?
b. P3,577.00
35. Compute the equivalent rate of 8% compounded quarterly to a rate compounded bi-monthly.
c. 0.0797

36. A young engineer borrowed P10,000 at 12% interest and paid p2,000 per annum for the last
four years. What does he have pay at the end of the fifth year in order to pay his loan?
d. P6,919.28

37. Find the interest factor if A = $600 , n = 15 years, and i = 5% compounded annually
b. 10.379
38. A service car whose cash price was P540,000 was brought with the down payment of P162,000
and monthly of P10,874.29 for 5 years. What was the rate of interest if compounded monthly?
c. 0.24
39. What is the corresponding effective rate of 18% compounded semi-annually?
d. 0.1948
40. A fixture that costs P700.00 will save per item produced. Maintenance will be P40,000 annually,
3500 units are produced annually. What is the payback period at 10%?
d. 5.57 years
41. The VISA CREDIT CARD charges 3% interest per month on the unpaid balance for purchases
made on this card. Compute the effective rate of interest.
a. 0.4258
42. A manufacturing firm wishes to give each 80 employees a holiay bonus. How much is needed to
invest monthly for a year at 12% nominal interest rate compounded monthly, so that each
employee will receive a P2,000 bonus?
c. P12,610.00
43. Find the value of P if A = $600 , n = 15 years, and i = 5% compounded annually
c. P=$6,227.40

44. Mr. J. Reyes borrowed money from the bank. He received from the bank P1,842 and promise to
repay P2,000 at the end of 10 months. Determine the simple interest.
c. 0.1029

45. How many years will it take $10 to be four times its original value if invested at the rate of 7%
compounded semi-annually?
a. 20.15 years
46. A car was bought on installmentbasis with a monthly installment of P10,000.00 for 60 months. If
interest is 12% compounded annually calculate the cash price of the car.
a. P455,875.00
47. Which of the following is equivalent to TC
b. FC + VC.
48. A sum of P1,000 is invested now and left for eight years, at which time the principal is
withdrawn. The interest was accrued is left for another eight years. If the effective annual
interest rate is 5%. What will be the withdrawal amount at the end of the 16th year?
b. P706.00
49. By the conditions of a will, the sum of P25,000 is left to a girl to be held in a trust fund by her
guardian until it amounts to P45,000. When will the girl receive the money if the fund is invested
at 8% compounded quarterly?
a. 7.42 years
50. You loan from a loan firm an amount of P100,000 with the rate of simple interest of 20%, but
interest was deducted from the loan at the time the money was borrowed. If at the end of one
year you have to pay the full amount of P100,000, what is the actual rate of interest?
a. 0.25
51. A man borrowed P 20,000 from a local commercial bank which has a simple interest of 16% but
the interest is to be deducted from the loan at the time that the money was borrowed and the
loan is payable at the end of one year. How much is the actual rate of interest?
c. 0.19
52. Find the present value in pesos, of a perpetuity of P15,000 payable semi-annually if money is
worth 8%, compounded quarterly.
c. 371287
53. An asset is purchased for P9,000.00. Its estimated life is 10 years, after which it will be sold for
P1,000.00. Find the book value during the first year if sum-of the-year's digit (SOYD)
depreciation is used.
b. P7,545.00
54. P4,000 is borrowed for 75 days at 16% per annum simple interest. How much will be due at the
end of 75 days?
c. P4,133.33

55. An employee obtained a loan of P10,000 at the rate of 6% compounded annually in order to
repair a house. How much he pay monthly to amortize the loan within a period often years?
a. P110.02
56. Marginal cost can best be approximated by the formula:
a. Change in total cost/Change in input
b. Change in total cost/Change in output
c. Total cost/ Output
d. Total cost/Input cost