IC28 Mock Test Sample 5

Q1. For an irredeemable debenture giving 3% half-yearly dividend at effective rate 8% p.a., the purchase price per Rs. 100 nominal value is approximately:
a) Rs. 100.00
b) Rs. 76.47
c) Rs. 150.00
d) Rs. 50.00

Q2. Considering frequencies of conversion, an annuity of Rs. 200 p.a. payable quarterly for 8 years at 8% p.a. convertible quarterly is best evaluated by:
a) Treating it as 32 quarterly payments at 2% per quarter
b) Using yearly tables at 8%
c) Using half-yearly rate
d) Using effective rate only

Q3. In a problem with simultaneous annuity and lump sum, valuation requires:
a) Computing accumulated value of annuity and adding lump sum
b) Computing only present value
c) Computing only accumulated value of lump sum
d) Ignoring annuity payments

Q4. In an immediate annuity, the value as at the commencement of the annuity is:
a) sn|
b) ān|
c) ä n|
d) Zero

Q5. For an immediate annuity, ān| and sn| represent values of the same set of payments at:
a) Same point in time
b) Different points in time, n years apart
c) Random points
d) Beginning of each period

Q6. ān| is a geometric progression with common ratio:
a) 1+i
b) v
c) i
d) 1/n

Q7. In a loan repayment instalment problem, the equation involves:
a) Cash price equated to PV of immediate payment plus PV of half-yearly payments
b) Only future value calculation
c) Equating accumulated value of payments
d) No interest considerations

Q8. In Example 1, calculating the present value of varying payments at 8% requires:
a) Computing each payment's PV separately or splitting into uniform parts
b) Using only a8|
c) Ignoring smaller payments
d) Using compound interest tables only

Q9. In Example 1 (Second Method), the PV of Rs. 200 p.a. for 8 years at 8% using a8| = 5.7466 is:
a) Rs. 1149.32
b) Rs. 1500.00
c) Rs. 2000.00
d) Rs. 1000.00

Q10. In Example 2, (a6n|)/(a3n|) equals:
a) 1 + v3n
b) 1 − v3n
c) v3n
d) 1

Q11. In Example 3, the accumulated value of 8 payments at the end of 8 years at 8% is approximately:
a) Rs. 2866.34
b) Rs. 2000.00
c) Rs. 3000.00
d) Rs. 1500.00

Q12. In Example 3 (First Method), the first payment of Rs. 300 at end of year 1 earns interest for:
a) 1 year
b) 7 years
c) 8 years
d) 0 years

Q13. In equation (2.6), the relation ān| = vn sn| holds because:
a) Both sides are the same set of payments valued at time 0
b) They are unrelated
c) vn accumulates the values
d) s is always greater

Q14. For an annuity-due of 1 p.a., the value of the first payment at time 0 is:
a) v
b) 1
c) vn
d) 0

Q15. For an annuity-due of 1 p.a. for n years, the present value is:
a) 1 + v + v² + … + vn−1
b) v + v² + … + vn
c) 1 + v + v² + … + vn
d) ((1+i)n−1)/i

Q16. In Example 1 (Second Method), the difference of Rs. 1 paise between methods is due to:
a) Calculation error
b) Use of annuity values rounded differently
c) Different rates
d) Different time periods

Q17. For practical computation of annuity products like (1+i)t ān|, the short method is useful when:
a) t < n
b) t > n
c) t = 0
d) t = −1

Q18. For evaluating vt sn| where t < n, the short method gives:
a) sn−t| + at|
b) sn+t| − st|
c) ān|
d) vn sn|

Q19. The annuity due formula ä n| = (1+i) ān| is derived because:
a) Each payment is one period earlier than in immediate annuity
b) Each payment is one period later
c) Payments are equal
d) Interest rate is doubled

Q20. The relation 1 = d ä n| + vn expresses:
a) A unit invested gives d at start of each year for n years and 1 at end
b) A unit gives interest only
c) A unit gives no return
d) Standard interest formula