engineering economy MCQs

Practise focused engineering economy questions with marked answers for exam preparation and subject revision.

engineering economy Mcqs
1. What refers to a document that shows proof of legal ownership of a financial security ?
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A. Bank note

B. Bond

C. Coupon

D. Check

2. The depletion allowance method of computing depletion is commonly known as ___________________?
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A. Percentage method

B. Sinking fund method

C. Factor method

D. Unit method

3. What refers to the goods and services that are required to support human life, needs and activities ?
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A. Necessity

B. Luxury

C. Producer products

D. Consumer products

4. What is defined as the reduction or fall of the value of an asset due to constant use and passage of time ?
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A. Depreciation

B. Depletion

C. Inflation

D. Deflation

5. What bond whose security is a mortgage on certain specified assets of the corporation ?
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A. Collateral trust bond

B. Registered bond

C. Mortgage bond

D. Debenture bond

6. Mr. Bacani borrowed money from the bank. He received from the bank P1,842 and promised to repay P2,000 at the end of 10 months. Determine the rate of simple interest?
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A. 12.19%

B. 12.03%

C. 11.54%

D. 10.29 %
7. What is the term for an annuity with a fixed time span ?
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A. Ordinary annuity

B. Annuity certain

C. Annuity due

D. Perpetuity

8. What annuity is required over 12 years to equate with a future amount of P 20,000? Assume i= 6% annually ?
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A. P 1,205.74

B. P 1,290.34

C. P 1,107.34

D. P 1,185.54
9. A investor wishes to earn 7% on his capital after payment of taxes. If the income from an available investment will be taxed at an average rate of 42%, what minimum rate of return, before payment of taxes, must the investment offer to be justified ?
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A. 12.87%

B. 12.34%

C. 12.07 %

D. 12.67%

10. Duopsony is a market situation where there is/are______________?
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A. Few sellers and few buyers

B. One seller and few buyers

C. Many sellers and few buyers

D. Few sellers and many buyers

11. A loan for P50,000 is to be paid in 3 years at the amount of P65,000. What is the effective rate of money ?
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A. 9.01%

B. 9.41%

C. 9.31%

D. 9.14 %
12. What type of bond which can be redeemed before maturity date ?
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A. Callable bond

B. Preferred bond

C. Registered bond

D. Incorporators bond

13. What is the present worth of two P 100 payments at the end of the third year and fourth year? The annual interest rate is 8%?
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A. P 151.09

B. P 153.89

C. P 150.56

D. P 152.88
14. A type of bond to which are attached coupons indicating the interest due and the date when such interest is to be paid is called ____________________?
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A. Coupon bond

B. Mortgage bond

C. Registered bond

D. Collateral trust bond

15. A mathematical expression also known as the present value of annuity of one is called ____________________?
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A. Load factor

B. Sinking fund factor

C. Present worth factor

D. Demand factor

16. What type of bond whose guaranty is in lien on railroad equipment, such as freight and passenger cars, locomotives, etc ?
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A. Railroad bond

B. Equipment trust bond

C. Equipment bond

D. Equipment obligation bond
17. What is defined as any tangible economic product that contributes directly or indirectly to the satisfaction of human want ?
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A. Goods or commodities

B. Services

C. Commodities

D. Goods

18. What is a market situation whereby there is only one buyer of an item for which there is no goods substitute ?
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A. Oligopoly

B. Monopoly

C. Oligopsony

D. Monopsony
19. An amount of P1,000 becomes P1,608.44 after 4 years compounded bimonthly. Find the nominal interest?
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A. 12.32%

B. 11.89%

C. 12.00%

D. 12.08%

20. One bankers year is equivalent to ________________ days?
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A. 365

B. 300

C. 366

D. 360
21. What is defined as the reduction of the value of certain natural resources such as mines, oil, timber, quarries, etc. due to the gradual extraction of its contents ?
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A. Inflation

B. Deflation

C. Depreciation

D. Depletion
22. A farmer selling eggs at 50 pesos a dozen gains 20%. If he sells the eggs at the same price after the costs of the eggs rises by 12.5%, how much will be his new gain in percent ?
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A. 6.65 %

B. 6.89%

C. 6.58%

D. 6.12%

23. What refers to the amount of a product made available for sale ?
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A. Supply

B. Demand

C. Product

D. Good

24. A machine costs of P 8,000 and an estimated life of 10 years with a salvage value of P 500. What is its book value after 8 years using straight line method ?
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A. P 2,000.00

B. P 2,200.00

C. P 2,100.00

D. P 2,300.00

25. What is the type of annuity where the payments are made at the end of each period starting from the first period ?
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A. Deferred annuity

B. Ordinary annuity

C. Annuity due

D. Perpetuity

26. What do you call the after-tax present worth of all depreciation effects over the depreciation period of the asset ?
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A. Depreciation recovery

B. After-tax recovery

C. Asset recovery

D. Period recovery

27. If there is only one seller and many buyers, the market situation is ______________________?
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A. Oligopsony

B. Duopsony

C. Oligopoly

D. Monopoly
28. Mr. Jun Ramos was granted a loan of P20,000 by his employer Excel First Review and Training Center, Inc. with an interest of 6% for 180 days on the principal collected in advance. The corporation would accept a promissory note for P20,000 non-interest for 180 days. If discounted at once, find the proceeds of the note?
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A. P18,000

B. P18,900

C. P19,000

D. P19,100

29. Duopoly is a market situation where there is/are____________?
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A. Many sellers and few buyers

B. Few sellers and few buyers

C. One seller and few buyers

D. Few sellers and many buyers
30. A sum of P1,000 is invested now and left for eight years, at which time the principal is withdrawn. The interest has 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 ?
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A. P700.12

B. P705.42

C. P693.12

D. P702.15

31. Using factor method, the depletion at any given year is equal to ?
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A. Initial cost of property times number of units sold during the year

B. Initial cost of property times number of unit sold during the year divided by the total units in property

C. Initial cost of property divided by the number of units sold during the year

D. Initial cost of property divided by the total units in property

32. A feasibility study shows that a fixed capital investment of P10,000,000 is required for a proposed construction firm and an estimated working capital of P2,000,000. Annual depreciation is estimated to be10% of the fixed capital investment. Determine the rate of return on the total investment if the annual profit is P3,500,000?
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A. 30.78%

B. 29.17 %

C. 30.12%

D. 28.33%

33. In what method of computing depreciation where it assumes that the loss in value is directly proportional to the age of the equipment or asset ?
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A. Sinking fund method

B. Declining balance method

C. Straight line method

D. Sum-of-year digit method

34. What refers to the present worth of the probable future net earnings ?
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A. Earning value

B. Going concern value

C. Total market value

D. Total fair value

35. What refers to the amount of money paid for the use of borrowed capital ?
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A. Simple interest

B. Rate of interest

C. Principal

D. Interest
36. What type of depreciation is due to the reduction in the demand for the function that the equipment or asset was designed to render ?
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A. Functional depreciation

B. Demand depreciation

C. Physical depreciation

D. Design depreciation

37. If there are many sellers and few buyers, the market situation is ______________________?
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A. Oligopoly

B. Monopoly

C. Oligopsony

D. Duopsony

38. What refers to the market situation in which any given product is supplied by a very large number of vendors and there is no restriction against additional vendors from entering the market ?
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A. Monopoly

B. Oligopoly

C. Perfect competition

D. Oligopsony

39. When one of the factors of production is fixed in quantity or is difficult to increase, increasing the other factors of production will result in a less than proportionate increase in output. This statement is known as the______________?
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A. Law of supply and demand

B. Law of supply

C. Law of demand

D. Law of diminishing return
40. What is the type of annuity that does not have a fixed time span but continues indefinitely or forever ?
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A. Ordinary annuity

B. Annuity due

C. Perpetuity

D. Deferred annuity

41. Shell Philippines, a multinational company, has a total gross income for a particular year of P 50,000,000. The taxable income after taking all deductions except for depletion is P 18,500,000. What is the allowable depletion allowance for that particular year? Take percentage of gross income for oil as 22%?
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A. P 9,358.41

B. P 9,228.45

C. P 9,308.45

D. P 9,250.00
42. Under the depletion allowance method in computing depreciation, the depletion charge is equal to either ________________ which ever is smaller ?
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A. Fixed percentage of gross income or 50% of the net taxable income

B. 50% of the fixed percentage of gross income or the net taxable income

C. 50% of the fixed percentage of gross income or 50% of the net taxable income

D. Fixed percentage of gross income or the net taxable income

43. What is considered as the standard unit which forms the basis of a countrys domestic money supply ?
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A. Foreign exchange

B. Cash or check

C. Monetary unit

D. Currency

44. What market situation exists where there are few sellers and few buyers ?
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A. Bilateral Oligopsony

B. Bilateral oligopoly

C. Oligopsony

D. Oligopoly

45. An asset is purchased for P 9,000.00. Its estimated economic life is 10 years after which it will be sold for P 1,000.00. Find the depreciation in the first three years using sum-of-years digit method____________________?
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A. P 3,279.27

B. P 3,729.27

C. P 3,792.72

D. P 3,927.27
46. Miss Evilla borrowed money from a bank. She receives from the bank P1,340.00 and promised to pay P1,500.00 at the end of 9 months. Determine the corresponding discount rate or often referred to as the bankers discount?
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A. 13.15%

B. 13.46%

C. 13.32%

D. 13.73 %
47. A man loans P 187,400 from a bank with interest at 5% compounded annually. He agrees to pay his obligations by paying 8 equal annual payments, the first being due at the end of 10 years. Find the annual payments ?
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A. P 43,489.47

B. P 43,763.20

C. P 43,600.10

D. P 43,263.91

48. First Benchmark Publishings gross margin is 50% of sales. The operating costs of the publishing are estimated at 15% of sales. If the company is within the 40% tax bracket, determine the percent of sales is their profit after taxes ?
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A. 20%

B. 21 %

C. 18%

D. 19%

49. A loan of P5,000 is made for a period of 15 months, at a simple interest rate of 15%, what future amount is due at the end of the loan period ?
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A. 5,937.50

B. 5,873.20

C. 5,712.40

D. 5,690.12

50. The exact simple interest of P5,000 invested from June 21, 1995 to December 25, 1995 is P100. What is the rate of interest ?
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A. 3.92%

B. 3.98%

C. 3.90 %

D. 3.95%