ENGINEERING ECONOMIC ANALYSIS EXAM
SCRIPT 2026 TEST PAPER QUESTIONS AND
SOLUTIONS GRADED A+
◉ Time Value of Money (TVM). Answer: the change in the amount of
money over time for funds owed by or owned by a corporation or
individual
◉ Interest. Answer: - the indicator of the time value of money
- a "fee" that one pays to borrow money
interest = amount owed after period - principal
◉ Interest Rate. Answer: - interest paid over a time period
(expressed as % of principal)
interest rate = [ interest accrued per time unit / principal ] * 100
◉ Rate of Return (ROR). Answer: - interest earned over a period of
time (expressed as % of principal)
,rate of return = [ interest accrued per time unit / original amount ] *
100
◉ Minimum Acceptable Rate of Return (MARR). Answer: - the
minimum profit an investor expects to make from an investment
◉ What's the difference between Interest Rate and Rate of Return?.
Answer: - Interest is from the borrowers perspective (interest rate
paid)
- Rate of Return is from the lender's perspective (rate of return
earned)
◉ Problem 1:
Reese, a musical lyricist, plans to borrow $20,000 from the bank for
1 year at 9% interest to upgrade currently owned recording
equipment.
a) Compute the interest amount after 1 year.
b) Compute the total amount due after 1 year.. Answer: a) $1,800
b) $21,800
◉ Inflation. Answer: - decreases the value of money
- increases interest rates on loans
, - lowers rate of return on investments
◉ Purchasing Power. Answer: - synonymous with 'buying power'
- increases in inflation causes decreases in purchasing power
- amount you can buy with the amount you have
e.g. last year $12 buys you x,y,z while this year $12 only buys x,y
◉ What do the following symbols represent?
a) t
b) P
c) F
d) A
e) n
f) i. Answer: a) time, usually in periods such as years or months
b) value of money at a time (t) designated as present or time 0
c) value of money at some future time, such as t = n periods
d) series of consecutive, equal, end of period amounts
e) number of interest periods
f) interest rate or rate of return per time period
SCRIPT 2026 TEST PAPER QUESTIONS AND
SOLUTIONS GRADED A+
◉ Time Value of Money (TVM). Answer: the change in the amount of
money over time for funds owed by or owned by a corporation or
individual
◉ Interest. Answer: - the indicator of the time value of money
- a "fee" that one pays to borrow money
interest = amount owed after period - principal
◉ Interest Rate. Answer: - interest paid over a time period
(expressed as % of principal)
interest rate = [ interest accrued per time unit / principal ] * 100
◉ Rate of Return (ROR). Answer: - interest earned over a period of
time (expressed as % of principal)
,rate of return = [ interest accrued per time unit / original amount ] *
100
◉ Minimum Acceptable Rate of Return (MARR). Answer: - the
minimum profit an investor expects to make from an investment
◉ What's the difference between Interest Rate and Rate of Return?.
Answer: - Interest is from the borrowers perspective (interest rate
paid)
- Rate of Return is from the lender's perspective (rate of return
earned)
◉ Problem 1:
Reese, a musical lyricist, plans to borrow $20,000 from the bank for
1 year at 9% interest to upgrade currently owned recording
equipment.
a) Compute the interest amount after 1 year.
b) Compute the total amount due after 1 year.. Answer: a) $1,800
b) $21,800
◉ Inflation. Answer: - decreases the value of money
- increases interest rates on loans
, - lowers rate of return on investments
◉ Purchasing Power. Answer: - synonymous with 'buying power'
- increases in inflation causes decreases in purchasing power
- amount you can buy with the amount you have
e.g. last year $12 buys you x,y,z while this year $12 only buys x,y
◉ What do the following symbols represent?
a) t
b) P
c) F
d) A
e) n
f) i. Answer: a) time, usually in periods such as years or months
b) value of money at a time (t) designated as present or time 0
c) value of money at some future time, such as t = n periods
d) series of consecutive, equal, end of period amounts
e) number of interest periods
f) interest rate or rate of return per time period
