13. 14. 15. 16. 17. 18. 19. 20. A person deposits a sum of BWP 100,000 in the bank for his son's education who will be admitted to a professional course after 6 years. The bank pays 10% market interest rate, compounded annually. Find the future amount of the deposited money at the time of admitting his son in the professional course. A person who is just 30 years old is planning for his retired life. He plans to invest an equal sum of BWP 10,000 at the end of every year for the next 30 years starting from the end of next year. The bank gives 12% market interest rate, compounded annually. Find the maturity value of his account when he is 60 years old. A financial institution introduces a plan to pay a sum of BWP 1,500,000 after 10 years at a market rate of 12%, compounded annually. Find the annual equivalent amount that a person should invest at the end of every year for the next 10 years to receive BWP 1,500,000 after 10 years at the institution. A company is planning to expand its business after 5 years from now. The money required for the expansion programme is BWP 40,000,000. What annual equivalent amount should the company deposit at the end of every year at a market interest rate of 10% compounded annually to get BWP 40,000,000 5 years from now? A company wants to set up a reserve which will help it to have an annual equivalent amount of BWP 1,500,000 for the next 20 years for its employee's welfare measures. The reserve is assumed to grow at the rate of 15% annually. Find the single payment that must be made as the reserve amount now. A car rental company recently advertised its car for a down payment of BWP 150,000. Alternatively, the car can be taken home by customers without making any payment, but they have to pay equal yearly installments of BWP 25,000 for 15 years at a market interest rate of 9%, compounded annually. Suggest the best alternative to the customers. A company takes a loan of BWP 2,000,000 to refurbish its boiler section. The loan is to be paid in 20 equal installments at a 12% market interest rate, compounded annually. Find the equal installment amount that should be paid for the next 20 years. A person invests a sum of BWP 50,000 in a bank at nominal interest rate of 8% for 15 years. The compounding is monthly. Find the maturity amount of the deposit after 15 years. 1. 2. UNIVERSITY OF BOTSWANA DEPARTMENT OF ECONOMICS ECO-313 ENGINEERING ECONOMICS TUTORIAL SET-I What is economics? Also discuss the flow of goods, services and resources and the money payments in a simple economy with the aid of a suitable diagram. List the four major resource categories. What do we call the payments each of these resources? 3. Discuss two determinants of economic growth. 4. Illustrate the effect of price on demand and supply; illustrate with the help of a diagram. 5. Discuss the factors that influence demand and supply. 6. Distinguish between technical and economic efficiency by giving examples. 7. Give the definition and scope of engineering economics 8. Clearly explain the method of deriving the selling price of a product. 9. Define each of the following: 10. a) Marginal cost b) Marginal revenue c) Average cost d) Sunk cost Define each of the following: a) Cash cost b) Book cost 11. Define inflation and list the causes of inflation 12. Explain the time value of money