1) An important part of mastering engineering economics is developing an intuitive grasp of the effects of interest rate changes. You should be able to answer some questions without doing any explicit calculation, ideally within thirty seconds or less. The following is an example of such a question:
My MARR is 15%. I have two proposals in front of me: Proposal A involves a large immediate investment, and yields a substantial payback at the end of three years; Proposal B involves a fixed annual expenditure, and a (larger) annual return. Present-worth analysis ranks both equally. If my MARR is now 12%, which proposal will I favour? Why?
2) According to SFU’s Fees and Tuition policy, outstanding fees must be paid by the due date of each term. A late fee interest will be assessed on the outstanding overdue balance on your account. The rate is 2% per month (nominal rate) or 18% per annum (effective rate). How often is interest compounded?