IC28 Mock Test Sample 12

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Q1. The principal outstanding at the end of one year (after first level payment of unit annuity loan) is:

a) $a_{\overline{n-1}|}$
b) $a_{\overline{n}|}$
c) $a_{\overline{n+1}|}$
d) $s_{\overline{n-1}|}$

Q2. The interest contained in the m-th yearly instalment (formula 4.1) is:

a) $v^{m-1}$
b) $1-v^{n-m+1}$
c) $v^{n-m+1}$
d) $1-v^{m}$

Q3. The principal contained in the m-th yearly instalment (formula 4.2) is:

a) $1-v^{n-m+1}$
b) $v^{n-m+1}$
c) $v^{m-1}$
d) $1-v^{m}$

Q4. The principal outstanding at the end of m years (formula 4.3) is:

a) $a_{\overline{n-m}|}$
b) $a_{\overline{m}|}$
c) $s_{\overline{n-m}|}$
d) $v^{n-m}$

Q5. In Example 1, a loan of Rs. 10,000 at 8% repaid over 5 years has level annual instalment X equal to approximately:

a) Rs. 2000
b) Rs. 2504.56
c) Rs. 3000
d) Rs. 1500

Q6. In Example 1, the principal contained in the 3rd instalment using relation (4.2) is approximately:

a) Rs. 1988.20
b) Rs. 2504.56
c) Rs. 1235.76
d) Rs. 2180.20

Q7. In Example 1, the principal outstanding at the end of 3 years (using 4.3) is approximately:

a) Rs. 4466.38
b) Rs. 5000
c) Rs. 6500
d) Rs. 3000

Q8. For a loan repaid by p instalments per year of $x/p$, with annual rate i, the annual payment x equals (formula 4.4):

a) $A/a_{\overline{n}|}$
b) $A/a^{(p)}_{\overline{n}|}$
c) $A \cdot i^{(p)}/p$
d) $A \cdot p$

Q9. The interest repaid in the m-th instalment for a p-thly payable loan (formula 4.5) is:

a) $(A)/(p \cdot a^{(p)}_{\overline{n}|})(1-v^{n-(m-1)/p})$
b) $(A)/(p)(1-v^{n})$
c) $A \cdot v^{n-(m-1)/p}$
d) $(A)/(a^{(p)}_{\overline{n}|})v^{n-(m-1)/p}$

Q10. The principal repaid in the m-th instalment of a p-thly payable loan (formula 4.6) is:

a) $(A)/(p \cdot a^{(p)}_{\overline{n}|}) \cdot v^{n-(m-1)/p}$
b) $(A)/(a_{\overline{n}|}) \cdot v^{m}$
c) $A \cdot v^{n}$
d) $1/(a^{(p)}_{\overline{n}|})$

Q11. For a p-thly payable loan, successive principal repayments form a geometric progression with common ratio:

a) $(1+i)$
b) $(1+i)^{1/p}$
c) $v$
d) $v^{1/p}$

Q12. In Example 1 (monthly instalments), the monthly instalment for Rs. 10,000 loan at 10% effective over 5 years is approximately:

a) Rs. 167
b) Rs. 210.36
c) Rs. 250
d) Rs. 300

Q13. In Example 2, a loan of Rs. 15,000 repaid by 5 instalments every 2 years at 8% p.a. effective. The biennial instalment is:

a) Rs. 3000
b) Rs. 4000
c) Rs. 4649.70
d) Rs. 5000

Q14. In Example 2, the effective rate per 2-year period equivalent to 8% p.a. effective is:

a) 0.16
b) 0.1664
c) 0.08
d) 0.20

Q15. In Example 3, a loan of Rs. 16000 over 15 years at 8% for first 6 years and 7% thereafter. The level yearly instalment is approximately:

a) Rs. 1500
b) Rs. 1833.05
c) Rs. 2000
d) Rs. 1700

Q16. In Example 3, the interest content of the 1st year payment (at 8% on Rs. 16000) is:

a) Rs. 1280
b) Rs. 1100
c) Rs. 1500
d) Rs. 800

Q17. What is a 'sinking fund'?

a) A fund that loses value over time
b) An accumulation fund built up by periodic deposits to repay capital at a future date
c) A loan repayment account
d) An investment in mutual funds

Q18. For a unit loan of n years at rate i, the uniform annual sinking fund deposit needed is:

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

Q19. Total annual outlay under sinking fund method (interest + sinking fund) for unit loan equals (formula 4.8):

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

Q20. In Example 4, a sinking fund of uniform payments to provide Rs. 3500 at end of 20 years at 10% requires annual contribution of approximately:

a) Rs. 50
b) Rs. 61.11
c) Rs. 75
d) Rs. 100

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