Time Value
TIME VALUE OF MONEY
1. If you were scheduled to receive Rs 100,000 five years hence, but you wish to sell your contract note for its present value, which type of compounding would you rather have the purchaser of your contract note to use to find the purchase price, 8 percent compounded: (a) (b) (c) (d) (e) Continuously Quarterly Semi-annually Annually None of the above
2. According to the rule of 69, the doubling period is equal to (a) (b) (c) (d) (e) 0.25 + (69/ Interest rate) 0.35 + (69/ Interest rate) 0.69 + (0.35/ Interest rate) 0.69 + (0.25 / Interest rate) None of the above
3. For a depositor, when the frequency of compounding is increased (a) (b) (c) (d) (e) Additional gains increase Additional gains dwindle Additional gains are unaffected There are no additional gains None of the above
4. Present value interest factor of a perpetuity represents (a) (b) (c) (d) (e) Interest rate in percentage terms Reciprocal of interest rate in percentage terms Reciprocal of interest rate in decimal terms Interest rate in decimal terms None of the above
5. The present value of a perpetuity of one rupee when the interest rate is r percent is: (a) (b) (c) (d) (e) 1/r 1/ r2 1/r0.5 2 r2 None of the above 1
6. The present value of an annuity due is equal to the present value of a regular annuity multiplied by : (a) (b) (c) (d) (e) r (1 + r) 1/r r(1 + r) None of the above
7. Recurring deposit in a bank is a typical example of: (a) (b) (c) (d) (e) Deferred annuity Annuity due Regular annuity Compound annuity None of the above
8. Deposits in a sinking fund is an example of: (a) (b) (c) (d) (e) Deferred annuity Annuity due Regular annuity Either a or c None of the above
9. In a loan amortisation schedule, as the number of years increases: (a) (b) (c) (d) (e) The interest amount increases The principal repayment amount increases The annual installment amount decreases Both a and c None of the above KEY 1 (d) 2 (b) 3 (b) 4 (c) 5 (a) 6 (b) 7 (b) 8 (d) 9 (a)
1. If you were scheduled to receive Rs 100,000 five years hence, but you wish to sell your contract note for its present value, which type of compounding would you rather have the purchaser of your contract note to use to find the purchase price, 8 percent compounded: (a) (b) (c) (d) (e) Continuously Quarterly Semi-annually Annually None of the above
2. According to the rule of 69, the doubling period is equal to (a) (b) (c) (d) (e) 0.25 + (69/ Interest rate) 0.35 + (69/ Interest rate) 0.69 + (0.35/ Interest rate) 0.69 + (0.25 / Interest rate) None of the above
3. For a depositor, when the frequency of compounding is increased (a) (b) (c) (d) (e) Additional gains increase Additional gains dwindle Additional gains are unaffected There are no additional gains None of the above
4. Present value interest factor of a perpetuity represents (a) (b) (c) (d) (e) Interest rate in percentage terms Reciprocal of interest rate in percentage terms Reciprocal of interest rate in decimal terms Interest rate in decimal terms None of the above
5. The present value of a perpetuity of one rupee when the interest rate is r percent is: (a) (b) (c) (d) (e) 1/r 1/ r2 1/r0.5 2 r2 None of the above 1
6. The present value of an annuity due is equal to the present value of a regular annuity multiplied by : (a) (b) (c) (d) (e) r (1 + r) 1/r r(1 + r) None of the above
7. Recurring deposit in a bank is a typical example of: (a) (b) (c) (d) (e) Deferred annuity Annuity due Regular annuity Compound annuity None of the above
8. Deposits in a sinking fund is an example of: (a) (b) (c) (d) (e) Deferred annuity Annuity due Regular annuity Either a or c None of the above
9. In a loan amortisation schedule, as the number of years increases: (a) (b) (c) (d) (e) The interest amount increases The principal repayment amount increases The annual installment amount decreases Both a and c None of the above KEY 1 (d) 2 (b) 3 (b) 4 (c) 5 (a) 6 (b) 7 (b) 8 (d) 9 (a)