QUIZ DRAFT FOR ZF1 CLASS

FINANCIAL MANAGEMENT

A. Conceptual Questions

1. How would an increase in the interest rate (i), or a decrease in the number of periods (n)
affect the future value (FVn) of a sum of money?

2. What is the time value of money? Give an examples of how the time value of money
might take on importance in business decisions

3. What is the main different between ordinary annuity and annuity due?

4. Explain what the periodic interest rate is? Give your own example!

B. Practical Question

1. You will get a prize for your achievements, and you are asked to choose one of the prizes as
follows:

a. Prize I: Money is given at the end of each year for 4 years with a total of IDR
10,000,000 in the 1st year, IDR 12,000,000 in the 2nd year, IDR 13,000,000 in the
3rd year and IDR 15,000 in the 4th year .000,-

b. Prize II: Given money for 4 years with the same nominal every year of Rp.
10,000,000, - with interest calculated every month.

c. Prize III: Given money in the next 4 years of Rp. 55,000,000,-

Decide which gift is better for you to choose with the assumption of 12% interest per
year! Show the calculations to support the decision

2. If $20,000 is invested today in an account that earns interest at a rate of 9.5 percent, what is
the value of the equal withdrawal that can be taken out of the account at the end of each of
the next 5 years if the investor plans to deplete the account at the end of the time period?

3. Mrs. Diana borrowed IDR 250,000,000 at Maspion Bank to build her house. The bank is
willing to provide a loan as much as Mrs. Diana wants with an interest rate of 11% per year.
The term of the loan is 5 years which will be repaid at the end of each year.

a. How many installments does Mrs. Diana have to pay every year?

b. Create an amortization schedule for the loan!

4. Thirty years ago, an investor bought a share of stock for $10. The stock has paid no dividend
during this period, yet it has yielded 20 percent, compounded annually, over the past 5 years.
If this is true, the investment’s worth is now?
5. Thomas Hill would like to have £1,500,000 at the time of his retirement, which is due in 40
years’ time. He has found a fixed income fund that pays 5 percent per annum. How much
does he have to invest today?

6. Penny has just turned 35 years old and plans to retire when she turns 65. She wants to buy a
small cottage in the Alps after retirement. She has just deposited €25,000 in an account that
pays 6 percent.