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41/3335–8FE Reference Handbook 10.4 · Engineering Economics
1. Simple Interest2. Single-Payment Compound Amount (F/P)3. Single-Payment Present Worth (P/F)4. Uniform-Series Compound Amount (F/A)5. Sinking-Fund Factor (A/F)6. Capital-Recovery Factor (A/P)7. Uniform-Series Present Worth (P/A)8. Effective Interest Rate9. Arithmetic Gradient Present Worth (P/G)10. Net Present Worth11. Benefit–Cost Ratio12. Straight-Line Depreciation13. Geometric Gradient Present Worth14. Capitalized Cost (Perpetual PW)15. Payback Period16. Break-Even Quantity17. Equivalent Uniform Annual Worth18. Internal Rate of Return vs MARR19. MACRS Depreciation20. Declining-Balance Depreciation21. Inflation and Real Interest22. Expected Value of Alternatives

Handbook formula

Simple Interest

Interest is computed only on the original principal. I is the interest earned, P the present principal, i the interest rate per period, and n the number of periods.

Interest earned
Present principal
Interest rate per period
Number of periods
Future amount

Step-by-step solved example

P = $2,000 at 6% simple interest for 4 years. Find I and F.

P1234In
Single present amount growing linearly (no compounding on the diagram).

  1. 1. Interest

    I = 2000(0.06)(4) = $480.

  2. 2. Future

    F = 2000 + 480 = $2,480.

Answer: I = $480, F = $2,480

10 practice questions

0/10 correct

1.Simple interest on $5,000 at 4% for 3 years is

2.F after 2 years if P = $1,000 and i = 5% simple is

3.Simple interest is proportional to

4.If I = $240, P = $2,000, n = 3, then i =

5.Compared with compound interest at the same i and n > 1, simple interest yields

6.n for I = $150, P = $1,000, i = 5% is

7.F = P(1 + in) is the simple-interest form of

8.$800 at 10% simple for 6 months earns

9.If F = $1,200 and P = $1,000 over 4 years simple, i =

10.Simple interest does NOT earn interest on