quiz1_practice
pdf
keyboard_arrow_up
School
Centennial College *
*We aren’t endorsed by this school
Course
724
Subject
Industrial Engineering
Date
Dec 6, 2023
Type
Pages
5
Uploaded by CountMusicFrog26
Sample Questions for further practice/knowledge Note: some Question numbers are missing (Q #s should align with answers #s) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Most of the economic values we use in our evaluation of Projects are 1) _______ A) derived from natural experiments. B) results of precise statistical surveys. C) precise and very descriptive. D) approximate. E) based on robust statistical estimation. 2) What is the best way to describe a mathematical model? 2) _______ A) It is a set of mathematical relationships with assumptions based on natural laws. B) It is a relationship that includes all aspects of a modelling situation. C) It describes all complex processes that occur in the real world. D) It is an exact copy of the real world. E) It is a simplification to describe the real world in a reasonable way. 3) Engineering economics is 3) _______ A) a set of tools to calculate an engineering project's costs. B) a set of methods to determine an engineering project's costs in terms of time value of money. C) a body of knowledge to determine which of several alternative is technically best. D) a set of rules to evaluate an engineering project. E) a collection of techniques for quantitative analysis to select a preferable alternative from several technically viable ones. 4) Stan borrowed $5 000 one year ago. Now he has to repay $5 100. The interest Stan pays is 4) _______ A) 102% B) 2% C) $5 100 D) $100 E) $5 000 5) Evaluation of an engineering project involves the following constraints: 5) _______ A) financial, environmental, social and political constraints. B) technical and financial constraints. C) budget and time constraints. D) time and money constraints. E) technological and social constraints. 6) Suppose that you are asked to evaluate a project of building a new bridge. Which of the following factors is the least important in terms of engineering economics? 6) _______ A) value added by the bridge B) service life of the bridge C) current interest rate D) vehicle stock in your city E) cost structure 7) Joan borrowed $1 000 one year ago. Now she has to repay $1 100. Therefore, the interest rate she pays is 7) _______ A) $1 000 B) 10% C) 110% D) $100 E) $1 100 8) You decide to buy a car. The following are some questions you have to answer with respect to your purchase. Which question is directly associated with Project economics? 8) _______
A) Ford or Toyota? B) what colour? C) to lease or to own? D) CD player or tape player? E) what size? 9) In Project economics, sensitivity analysis 9) _______ A) addresses risk in engineering projects. B) addresses inflation in a country. C) involves cash flows that are known with certainty. D) involves random variables with their probabilities. E) assesses the effect of uncertainty on a decision. 11) COSCO invested $5.5 million in a project ten years ago. As of today the worth of this project is $24.9 million. What annual interest rate has the project been earning if interest is compounded monthly? 11) ______ A) 15.8% B) 15.2% C) 16.2% D) 14.2% E) 14.8% 12) You have $100 to deposit. Bank A offers 20% simple interest, Bank B offers 15% interest compounded annually. How many years would you have to keep your money in the bank for Bank B to be a better choice than Bank A? 12) ______ A) 5 years B) 4 years C) Bank B will never be better. D) Bank B is always better. E) 6 years 13) The principal amount is 13) ______ A) the amount of money invested at the prime interest rate. B) the difference between the amount of money lent and the amount of money later repaid. C) the future value of money. D) the present value of money. E) the annual equivalent value of money. 14) What does a cash flow diagram of a project represent? 14) ______ A) change in value of money at different interest rates at various compounding periods B) summary of benefits and costs of a project C) summary of the timing and magnitude of payments and receipts as they occur over time D) magnitude of cash flows at a given period of time E) summary of present, future
, and annual worths of a project 15) If the effective annual interest rate is 10% and interest is continuously compounded, what is the nominal annual interest rate? 15) ______ A) 11.53% B) 12.53% C) 9.00% D) 10.53% E) 9.53% 16) You have $100 to deposit. Bank A offers 16% interest, compounded annually, Bank B offers 15% interest, compounded monthly. How many years would you have to keep your money in the bank for Bank B to be a better choice? 16) ______ A) 6 years
B) 4 years C) 5 years D) Bank B is always better. E) Bank B is never better. 18) It is known that the total interest paid over a 5-year period is $2 081.13. What was the principal amount borrowed at a 6% nominal interest rate compounded quarterly? 18) ______ A) $5 000 B) $3 000 C) $6 000 D) $7 000 E) $4 000 19) In general, an interest rate is 19) ______ A) the difference between the amount of money lent and the amount of money repaid later. B) a percentage change in the time value of money. C) the future worth of the money. D) the rate of return on direct investment. E) the ratio of the amount of money lent to the amount of money repaid later. 20) A municipality has just completed the construction of a bridge. It was calculated that operating and maintenance (O&M) costs of this bridge will be $20 000 in the first year with a 5% increase each year thereafter for the next 4 years. The interest rate used in calculations was 7.5% per year. What interest rate should be used to calculate the present worth of O&M costs over 5 years if we use the geometric series to present worth conversion factor? 20) ______ A) 1.9% B) 2.4% C) 7.5% D) 8.2% E) 5.0% 22) A person deposits $100 to his savings account biweekly. The savings account pays a nominal interest rate of 5% per year, compounded every six months. What is the effective interest rate for a 6-month period? 22) ______ A) 4.2% B) 5.1% C) 2.5% D) 3.2% E) 2.1% 23) The present worth factor 23) ______ A) gives the future amount that is equivalent to a present amount. B) converts a series of repeated equal payments into the equivalent future amount. C) converts an annuity into the equivalent present amount. D) gives the present amount that is equivalent to some future amount. E) gives the future value equivalent to a series of equal payments. 24) You want to have a million dollars in the bank when you retire. You think you can save $5 000 a year in a bank that offers you 5% interest. If you make your first deposit in a year's time, how many years will it be from now before you can retire? 24) ______ A) 70 B) 50 C) 60 D) 30 E) 40 27) In which of the following problems do you need Project economics? 27) ______ A) to decide whether or not to buy a car B) to chose the right textbook C) to decide whether to borrow money from parents or from a bank D) to choose a course in your program E) to decide where to spend summer vacation 28) You need to borrow $1 000 for a period of 10 years. Bank A will lend you the money at 10% interest, compounded annually, whereas Bank B will lend you the money at 10% interest, compounded monthly. At the end of ten years, how
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
much more interest will you owe if you borrow from Bank B instead of Bank A? 28) ______ A) $92.50 B) $148.12 C) $74.59 D) $113.30 E) $137.39 29) At some point in time Peter had $3 000 in spare cash. He deposited this money in his bank account that pays a 1.1% annual interest rate. After one year he was approached by his friend who said that he could offer Peter an investment deal for a two-year period. What would the market equivalence be of Peter's money? 29) ______ A) $3 066 B) $3 133 C) $3 000 D) $3 033 E) $3 100 30) A company undertakes a 5-year project that requires annual payments. Payment for the first year is It will then increase by 5% each subsequent year. The interest is fixed at 5% a year. What is the present worth of this cash flow?
30) ______ A) $10 226 B) $9 112 C) $9 524 D) $9 328 E) $9 442 31) You will need to buy a replacement computer, costing $3 000, in five years time. If you have a bank account which earns 8% annual interest, how much must you put in the bank every year in order to have enough money for the replacement, assuming you make your first deposit in a year's time? 31) ______ A) $597 B) $675 C) $712 D) $666 E) $565 32) An owner of a small company is deciding to sell her business. She received several options specified bellow. Which one should the company's owner accept? 32) ______ A) $600 000 in cash B) 15% of the future profits earned by the next owner during first 10 years C) $500 000 in government bonds earning a 5% rate of return over 10 years D) it is impossible to compare these offers due to uncertainty about basic economic variables over time E) $400 000 in securities earning an 8% rate of return over 8 years 33) If an interest rate is 18% per year, what is the equivalent interest rate per quarter? 33) ______ A) 4.8% B) 4.5% C) 6.2% D) 3.8% E) 8.6% 34) Maria wants to save up for a car. How much should she put in her bank account monthly to save $10 000 in two years if the bank pays 6% interest compounded monthly? 34) ______ A) $416.67 B) $393.20 C) $401.13 D) $293.21 E) $316.67
1) D 2) E 3) E 4) D 5) A 6) D 7) B 8) C 9) E 10) B 11) B 12) A 13) D 14) C 15) E 16) D 17) B 18) C 19) D 20) B 21) D 22) C 23) D 24) B 25) C 26) D 27) C 28) A 29) E 30) C 31) D 32) D 33) B 34) B 35) E