IC28 Mock Test Sample 10

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Q1. The accumulated value of a decreasing immediate annuity is related to:

a) $n(1+i)^n/s_{\overline{n}|}$
b) $1/i^2$
c) $a_{\overline{n}|}$ only
d) $v^n$ only

Q2. The accumulated value of a decreasing annuity due involves:

a) $1/d^2$
b) $s_{\overline{n}|}$ only
c) Immediate annuity formula only
d) Discount factor only

Q3. For a perpetuity in arithmetic progression where first payment is $A$ and increase is $D$, valuation depends on:

a) Arithmetic progression formula
b) Simple interest only
c) Equal payments throughout
d) Discounting one payment only

Q4. For a GP perpetuity with $|Rv| < 1$, the present value equals:

a) $Av/(1-Rv)$
b) $A/i$
c) $A/(1-R)$
d) $A/R$

Q5. In Exercise 3.1 Q.1, an annuity of 10 payments of Rs. 450 each is valued using:

a) $450a_{\overline{10}|}$
b) $450s_{\overline{10}|}$
c) $450 \times 10$
d) Discount factor only

Q6. In Exercise 3.1 Q.3(i), for an immediate perpetuity of Rs. 150 p.a., the valuation involves:

a) $150a_{\overline{\infty}|}$
b) $150/0.08$
c) $150 \times 3$
d) $150/0.08 \times 1.08$

Q7. In Exercise 3.1 Q.4, present value of Rs. 20 p.a. payable yearly requires:

a) Computing effective yearly rate
b) Using 7% directly
c) Using half-yearly rate
d) Using 14% effective rate

Q8. In Exercise 3.1 Q.5, the amount of immediate annuity involves:

a) $(1.02)^2 - 1 = 0.0404$
b) 0.04
c) 0.08
d) 0.02

Q9. In Exercise 3.1 Q.6, an annuity due of Rs. 600 p.a. payable twice yearly uses:

a) $(1.01)^3 -1 = 0.030301$
b) 0.03
c) 0.06
d) 0.06/2

Q10. In Exercise 3.1 Q.7, present value of immediate annuity involves:

a) $(1.04)^{1/6}-1$
b) 0.08/12
c) 0.04
d) $(1.08)^{1/12}-1$

Q11. In Exercise 3.1 Q.8, accumulated value of an annuity due uses:

a) $(1.035)^{1/2}-1$
b) 0.035
c) 0.07/4
d) $(1.07)^{1/4}-1$

Q12. In Exercise 3.2 Q.1, with rate 8% for first 12 years and 6% thereafter, valuation requires:

a) Splitting the annuity at year 12
b) Using only 8%
c) Using average of 8% and 6%
d) Using 6% throughout

Q13. In Exercise 3.2 Q.2(a), the expression obtained is:

a) 7.4987 − 7.0236 = 0.4751
b) 0.07
c) 1.05
d) 0.5

Q14. In Exercise 3.2 Q.4, PV of immediate perpetuity of Rs. 100 p.a. uses:

a) $50/0.04$
b) $100/0.08$
c) $50/0.08$
d) $100/0.04$

Q15. In Exercise 3.2 Q.5, A receives Rs. 1800 p.a. ad infinitum, first at year 6:

a) $1800v^5/0.09$
b) $1800/0.09$
c) $1800v^6$
d) $1800 \times 5$

Q16. In Exercise 3.2 Q.6, Rs. 150 deposited at the start of each year requires:

a) Computing accumulated values separately
b) Using one average rate
c) Treating as level annuity
d) Ignoring some rates

Q17. In Exercise 3.2 Q.7, PV at effective 9% of annuity of Rs. 120 involves:

a) $120(i)/(i^{(4)})$
b) $120a_{\overline{n}|}$
c) $120 \times 4$
d) $120s_{\overline{n}|}$

Q18. In Exercise 3.2 Q.8, P.F. deductions of Rs. 200 per month for 10 years use:

a) $(1.10)^{1/12}-1$
b) 0.10/12
c) 0.10
d) $(1.10)^{12}-1$

Q19. In Exercise 3.2 Q.10, Rs. 50 at end of each half-year for 5 years requires:

a) Half-yearly units initially, then quarterly conversion
b) Yearly units throughout
c) Monthly units
d) Weekly units

Q20. In Exercise 3.2 Q.11, an immediate perpetuity of Rs. 180 p.a. uses:

a) $(1+i^{(2)}/2)^2$
b) $i^{(2)} = 0.08$
c) $i^{(2)}/2 = 0.08$
d) $i^{(2)} = 0.04$

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