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ECON
Engineering Economy Terms
Definition | Term |
---|---|
– amount of money earned by a given capital | Interest |
interest directly proportional to the length of time and the amount of principal borrowed. | Simple Interest |
computed on the basis of one banker’s year. | Ordinary Simple Interest |
= 12 months ( 30 days each) | 1 banker’s year |
= 360 days | 1 banker’s year |
computed based on exact no. of days. | Exact Simple Interest |
ordinary year | 365 days |
leap year | 366 days |
interest is computed every end of each interest period and the interest earned for that period is added to the principal. | Compound Interest |
specifies the rate of interest and the number of interest periods per year | Nominal Rate of Interest |
– the actual rate of interest on the principal for one year. | Effective Rate of Interest |
consists of a series of equal payments made at equal intervals of time. | Annuity |
equal payments are made at the end of each payment period starting from the first period. | Ordinary Annuity |
payment of the first amount is deferred a certain number of periods after the first | Deferred Annuity |
payments are made at the start of each period, beginning from the first period. | Annuity Due |
periodic payments continue indefinitely | Perpetuity |
a sequence consisting of end-of-period payments, where each payment increases or decreases by a constant value. | Uniform Arithmetic Gradient |
a sequence consisting of end-of-period payments, where each payment increases or decreases by a fixed percentage. | Geometric Gradient |
sum of the first cost and the present worth of all future payments and replacements which is assumed to continue forever | Capitalized Cost |
period required to recover total investment | Recovery Period |
LEngth of time required to recover fixed capital | Payback Period |