Question 1

Calculate the value of an investment in which 1.9 million Uzbekistani Som (UZS) are invested each year, for 3 years, at 15% (to nearest UZS 10,000).&#10;A) UZS 7.35 million&#10;B) UZS 7.48 million&#10;C) UZS 7.59 million&#10;D) UZS 7.63 million

Accepted Answer

The future value of an annuity formula is used to calculate the investment value: FV = P * [(1 + r)^n - 1] / r. Here, P = 1.9 million, r = 0.15, and n = 3. Plugging in these values gives the future value closest to UZS 7.59 million.

Question 2

A company in Lagos, Nigeria needs to repay a debt totalling 900,000 Nigerian Naira (NGN) in 3 years' time. Assume payments are made into a sinking fund in arrears and can be invested at 7.5%. How much must the company save in order to meet its commitments (to the nearest NGN 10)?

A) NGN 278,560
B) NGN 278,570
C) NGN 278,580
D) NGN 278,590

NGN 278,580

Accepted Answer

NGN 278,580

Question 3

Which of the following options is the BEST definition of an annuity?&#10;A) A series of variable payments made over uniform time intervals&#10;B) A series of variable payments made over variable time intervals&#10;C) A series of fixed payments made over uniform time intervals&#10;D) A series of fixed payments made over variable time intervals

Accepted Answer

An annuity is best defined as a series of fixed payments made over uniform time intervals. This financial product is designed to provide consistent income or payments over a specified period, making option C the most accurate definition.

Question 4

Use a geometric progression to calculate the value of an investment where 12 monthly payments of &#163;250 are made with a nominal level of interest of 4.8% accrued monthly (to the nearest &#163;1).&#10;A) &#163;3,079&#10;B) &#163;3,066&#10;C) &#163;3,057&#10;D) &#163;3,043

Accepted Answer

The value of the investment can be calculated using the formula for the future value of a geometric series, which in the context of finance is often referred to as the future value of an annuity formula. The formula is: FV = P * [(1 + r)^n - 1] / r, where P is the payment amount, r is the monthly interest rate (annual rate divided by 12), and n is the total number of payments. Given a monthly payment of £250, an annual interest rate of 4.8%, and 12 payments, the monthly interest rate is 0.04 (4.8% annual rate) divided by 12 = 0.004. Plugging these values into the formula gives: FV = 250 * [(1 + 0.004)^12 - 1] / 0.004, which calculates to approximately £3,079 when rounded to the nearest £1.

Question 5

&#8364;20,000 is borrowed over 3 years at 9.5% compounded. Calculate the annuity that must be paid into the sinking fund in order to meet this commitment, assume payments are made in arrears and can be invested at 4.5% (to the nearest &#8364;10).&#10;A) &#8364;8,370&#10;B) &#8364;8,380&#10;C) &#8364;8,390&#10;D) &#8364;8,400

Accepted Answer

The answer of &#8364;20,000 is borrowed over 3 years at...

Question 6

When setting up a depreciation schedule, which of the following values is not required?&#10;A) Interest earned&#10;B) Amount in fund&#10;C) Purchase value of asset&#10;D) Payment into fund (depreciation charge)

Accepted Answer

The answer of When setting up a depreciation schedule, which...

Question 7

The payment of a pension is an example of which type of annuity?&#10;A) Perpetual&#10;B) Certain and ordinary&#10;C) Certain and due&#10;D) Contingent

Accepted Answer

A pension is a contingent annuity because its payments depend on the life of the recipient.

Question 8

Which of the following items is not a normal requirement for an amortization schedule?&#10;A) Annual payment&#10;B) Interest paid&#10;C) Amount outstanding&#10;D) Net present value of remaining amount

Accepted Answer

Net present value of remaining amount is not a normal requirement for an amortization schedule. An amortization schedule typically includes the annual payment, interest paid, and amount outstanding, but not the net present value of the remaining amount.

Question 9

A software company in Singapore fixes the rent for its office at 24,000 Singapore Dollars (SGD) per year payable in advance. Assuming a discount rate of 8%, calculate the total value of the payments in today's terms (to the nearest $10).

A) $221,830
B) $221,840
C) $221,850
D) $221,860

Accepted Answer

The answer of A software company in Singapore fixes the...

Question 10

A food processing plant in Poland takes out a loan of 1 million Polish Zloty (PLN) subject to interest at 6%. What must the annual payment be in order to pay the loan back in exactly 10 years (to the nearest 1 PLN)?

A) PLN 148,397
B) PLN 149,029
C) PLN 149,736
D) PLN 150,235

Accepted Answer

The annual payment can be calculated using the formula for an annuity, which is: Payment = P * [r(1 + r)^n] / [(1 + r)^n - 1], where P is the principal amount (1,000,000 PLN), r is the annual interest rate divided by the number of periods per year (0.06), and n is the total number of payments (10). Plugging these values into the formula gives an annual payment of approximately 149,029 PLN, rounding to the nearest zloty.

Deck 23: Annuities