1.

The interest rate used in the present value

calculation is often referred to as?
(a) Discount rate

(b) Inflation rate

(c) Nominal rate

(d) None of the given option

2. In 2 years you are to receive $10,000. If the

interest rate were to suddenly decrease, the
present value of that future amount to you
would?
(a) The correct answer cannot be determined without more information

(b) Rise

(c) Fall

(d) Remain unchanged

3. Which of the following is not true regarding

an annuity due?
(a) It is a series of equal cash flows

(b) It is also known as deferred annuity

(c) Cash flows occur for a specific time period

(d) Payments are made at the start of each period

4. You are to receive $1,000 every month for
50 months. Your rate of discount is 0.6% per
month. What is the present value to you of this
cash flow?
(a) $41,588

(b) $42,221

(c) $43,086

(d) $48,352

5. Which one of the following is the procedure

of finding out the Present Value (PV)?
(a) Discounting

(b) Compounding

(c) Time value of money

(d) All of above

6. An 8-year annuity due has a present value

of $1,000. If the interest rate is 5 percent, the
amount of each annuity payment is closest to
which of the following?
(a) $104.72

(b) $147.36

(c) $109.39

(d) $154.73
7. What is the present value of a $1,000
ordinary annuity that earns 8% annually for
an infinite number of periods?
(a) $12,500

(b) $80

(c) $800

(d) $1,000

8. The present value of an annuity of $5,000

to be received at the end of each of the next six
months for 6 years at a 4% annual rate would
be?
(a) $26,210

(b) $52,875

(c) $3,950

(d) None of the above

9. ________ is a series of payments or

receipts occurring over a specific number of
period, in_________ payments or receipts
occur at the end of each period.
In___________ Payments or receipts occur
at beginning of each period?
(a) Annuity, Ordinary annuity, Annuity due

(b) Annuity, Annuity due, Ordinary annuity

(c) Perpetuity, Ordinary annuity, Annuity due

(d) None

10. What is the present value of $2,500

semiannual payments received at the
beginning of each period for the next 10 years?
The APR is 6%?
(a) $38,309.50

(b) $37,194.70

(c) $35,809.50

(d) $36,884.80

1. Pension fund and insurance obligation is an

example of?
(a) Annuities

(b) Perpetuity

(c) Consol

(d) Securities

2. You are getting payments of Rs. 8,000 at

the beginning of every year and they are for
five years. At 6%, what is the value of this
annuity?
(a) Rs. 34,720
(b) Rs. 39,320

(c) Rs. 35,720

(d) None

3. In ordinary annuity payments or receipts

occur at?
(a) Beginning of each period

(b) End of each period

(c) Mid of each period

(d) Quarterly bases

4. Rental payment for apartment is an

example of?
(a) Annuity due

(b) Perpetuity

(c) Ordinary annuity

(b) Consol

5. _______________ is the series of

constant cash flows (CCF) over limited period
of time?
(a) Perpetuity

(b) Annuity

(c) Present value

(d) Future value

6. Payment of car loan is an example of?
(a) Annuity due

(b) Perpetuity

(c) Ordinary annuity

(d) Consol

7. Suppose you wish to set aside Rs. 2,000 at

the end of each of the next 10 years in an
account paying 12 percent compounded
annually. You accumulate at the end of 10
years an amount closest to?
(a) Rs. 22,456

(b) Rs. 35,098

(c) Rs. 28,324

(d) Rs. 20,324

8. In ten years you wish to own your business.

How much will you have in your bank account
at the end of the ten years if you deposit Rs.
300 each quarter? Assume end of the period
deposits and assume that the account is paying
an interest rate of 12% compounded quarterly?
(a) Rs. 230,127.30

(b) Rs. 30,000.00

(c) Rs. 23,298.91

(d) Rs. 22,620.38

9. Assume you are to receive a 20-year annuity

with annual payments of Rs. 50. The first
payment will be received at the end of Year 1,
and the last payment will be received at the
end of Year 20. You will invest each payment
in an account that pays 10 percent. What will
be the value in your account at the end of Year
30?
(a) Rs. 6,354.81

(b) Rs. 7,427.83

(c) Rs. 7,922.33

(d) Rs. 8,591.00

10. A 5-year annuity due has periodic cash

flows of Rs.100 each year. If the interest rate
is 8 percent, the future value of this annuity is
closest to which of the following equations?
(a) (Rs.100) (FVIFA at 8% for 5 periods)

(b) (Rs.100) (FVIFA at 8% for 4 periods) (1.08)

(c) (Rs.100) (FVIFA at 8% for 5 periods) (1.08)

(d) (Rs.100) (FVIFA at 8% for 4 periods) + Rs.100