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1 | |
Simple interest is when the interest earned on the principal: |
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| | A) | Is added to the principal only at the end of each year. |
| | B) | Accumulates with the principal after being added at the end of the year. |
| | C) | Does not accumulate with the principal after being added only at the end of the year. |
| | D) | Accumulates with the principal after being added at the end of the time period. |
| | E) | Does not accumulate with the principal. |
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2 | |
The future value after 4 periods of investing £10,000 at a simple interest rate of 5% is: |
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| | A) | £8,000. |
| | B) | £12,000. |
| | C) | £12,155. |
| | D) | £30,000. |
| | E) | None of the above. |
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3 | |
Compound interest is when the interest earned on the principal: |
|
| | A) | Is added to the principal only at the end of each year. |
| | B) | Accumulates with the principal after being added at the end of the year. |
| | C) | Does not accumulate with the principal after being added only at the end of the year. |
| | D) | Accumulates with the principal after being added at the end of the time period. |
| | E) | Does not accumulate with the principal. |
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4 | |
The Annual Percentage Rate APR is: |
|
| | A) | The nominal annual interest rate |
| | B) | A method of comparing the effective interest rates between institutions that have different interest rates. |
| | C) | The effective annual interest rate after compounding at the end of each year. |
| | D) | The effective annual rate of interest irrespective of the number of periods in which interest is applied and compounded in a year. |
| | E) | A method that allows comparison of the effective interest rate between institutions that calculate interest at different points in time. |
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5 | |
Company A gives a rate of interest of 5% which is compounded quarterly. The APR is: |
|
| | A) | 0.05 |
| | B) | 5.1% |
| | C) | 5% |
| | D) | 10% |
| | E) | None of the above |
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6 | |
Discounting is used to identify the future value of a current investment. |
|
| | A) | TRUE |
| | B) | FALSE |
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7 | |
If the future value of an investment is £30,000 and rate of interest to be applied is 5%, how long would it take £15,000 invested today to achieve this future value? |
|
| | A) | Just over 14 years. |
| | B) | Just over 15 years. |
| | C) | Nearly 2 years. |
| | D) | 18 years. |
| | E) | None of the above. |
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8 | |
If the future value is £45,000 after 10 years and the present value is £15,000, what is the annual growth rate? |
|
| | A) | 10%. |
| | B) | 10.5%. |
| | C) | 11.0%. |
| | D) | 11.5%. |
| | E) | None of the above. |
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9 | |
The rate of depreciation of an asset is 12.5% per year. How much will the current book value be of an asset purchased 5 years ago for £50,000 if reducing balance depreciation is used? |
|
| | A) | £90,101 |
| | B) | £25,645 |
| | C) | £18,750 |
| | D) | £31,250 |
| | E) | None of the above |
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10 | |
Endowment schemes for individuals and sinking funds for businesses are a way of: |
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| | A) | Making regular savings (individuals) /putting aside a regular sum to invest in the future (businesses). |
| | B) | Saving equal amounts of money each time period. |
| | C) | Creating a future value where each saved amount and the running total attract compound interest. |
| | D) | A, B and C. |
| | E) | None of the above. |
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11 | |
The calculation of the future value of a savings scheme utilises the fact that the stream of payments and their interest is: |
|
| | A) | An arithmetic series. |
| | B) | A diagonal series. |
| | C) | A geometric series. |
| | D) | An orthogonal series. |
| | E) | None of the above. |
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12 | |
If payments are made at the beginning of a period and interest added at the end of the period, this can still be treated as a savings scheme. |
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| | A) | TRUE |
| | B) | FALSE |
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13 | |
Which two concepts are mathematically related? |
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| | A) | Repayment and endowment mortgages. |
| | B) | Endowment mortgages and annuities. |
| | C) | Repayment mortgages and pension schemes. |
| | D) | Repayment mortgages and annuities. |
| | E) | None of the above. |
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14 | |
The purchase price of an annuity that guarantees an end of year income of £5000 over 10 years if the current annuity rate is 8% is: |
|
| | A) | £33,550. |
| | B) | £48,215. |
| | C) | £48,873. |
| | D) | £38,826. |
| | E) | £47,783. |
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15 | |
The simple interest formula is: |
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| | A) | The same as the simple growth formula. |
| | B) |  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0077098056/70736/ch13q02eq01.GIF ','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (0.0K)</a>]]>(1+3r) after three periods where <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0077098056/70736/ch13q02eq01.GIF ','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (0.0K)</a>]]> is the principal and r is the rate of interest. |
| | C) | <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0077098056/70736/ch13q02eq01.GIF ','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (0.0K)</a>]]> (1+tr) after t periods where  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0077098056/70736/ch13q02eq01.GIF','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (0.0K)</a>]]> is the principal and r is the rate of interest. |
| | D) | B and C. |
| | E) | A, B and C. |
2003 A McGraw-Hill Online Learning Centre