IC28 Mock Test Sample 6

Q1. In equation (2.20), m|ä n| can equivalently be written as (m−1)|ān|, where the deferment for the immediate annuity equivalent is:
a) m years
b) m−1 years
c) m+1 years
d) n−1 years

Q2. In Example 1, the present value of the first payment of Rs. 300 at end of year 1 at 8% is:
a) Rs. 277.78
b) Rs. 300.00
c) Rs. 257.20
d) Rs. 238.15

Q3. In Example 1, the present value of Rs. 300 payable at end of 5th year at 8% is:
a) Rs. 204.17
b) Rs. 250.00
c) Rs. 300.00
d) Rs. 180.00

Q4. For the accumulated value calculation in Example 3, the second method uses 200 s8| at 8%, where s8| = 10.6366, giving:
a) Rs. 3190.98
b) Rs. 2127.32
c) Rs. 1500.00
d) Rs. 1063.66

Q5. The convention ān| → 1/i as n → ∞ corresponds to:
a) A loan never being paid off
b) Perpetuity in arrear
c) Annuity due
d) Capital recovery

Q6. For perpetuity due, ä∞| can be derived from first principles as:
a) 1/d, where unit invested yields d at beginning of each year
b) 1/i only
c) Sum of finite payments
d) Equal to a∞|

Q7. The accumulated value of an annuity due of 1 p.a. in Example 13 reflects which key relationship?
a) s̈n| = sn+1| − 1
b) s̈n| = sn| − 1
c) s̈n| = sn−1|
d) s̈n| = ān|

Q8. For evaluating (1+i)7 a12| at 7% by short method, the result is:
a) s7| + a5|
b) s12| + a7|
c) a12|
d) v7 s12|

Q9. For evaluating v9 s14|, expressing as sum/difference gives:
a) s5| + a9|
b) s14| − s9|
c) a14| − a9|
d) v9 a14|

Q10. For (1+i)6 a18| the short method gives:
a) s6| + a12|
b) s18| − s6|
c) v6 s18|
d) a6| + s12|

Q11. v9 s15| equals:
a) s6| + a9|
b) s15| − s9|
c) a15|
d) v15 s9|

Q12. (1+i)8 a4| where t > n, writing t = m+n = 4+4, equals:
a) (1+i)4 s4|
b) s4|
c) a4|
d) v4 a4|

Q13. v9 s4| where t > n, writing t = m+n = 5+4, equals:
a) v5 a4|
b) s4|
c) a9|
d) v9 a4|

Q14. v4 a8| represents:
a) Present value of a deferred annuity
b) Accumulated value
c) Annuity due
d) Perpetuity

Q15. (1+i)5 sn| at intermediate stage means:
a) Accumulating sn| for further 5 years
b) Discounting
c) Adding 5 to n
d) Equal to sn|

Q16. (1+i)12 an| where 12 > n requires:
a) Accumulated value approach: (1+i)12−n sn|
b) Direct multiplication
c) Discounting only
d) Use of perpetuity formula

Q17. In Exercise 2.1 Q.4, deposits of Rs. 200 p.a. for 10 years then Rs. 300 p.a. for further 5 years; the amount payable on closing is found by:
a) Computing accumulated value of deposits at end of 15 years
b) Only summing deposits
c) Only computing PV
d) Using simple interest

Q18. In Exercise 2.1 Q.5, single payment at end of 20 years is equated to 80 quarterly payments of Rs. 50 at 8% convertible quarterly. The single payment equals:
a) Accumulated value of 80 payments at 2% per quarter for total period
b) PV of payments
c) Simple sum of payments
d) Single payment of Rs. 4000

Q19. In Exercise 2.2 Q.1, the value at end of 8 years of an immediate annuity of Rs. 125 p.a. for 12 years at 5% equals:
a) 125 (s8| + a4|)
b) 125 a12|
c) 125 s12|
d) 125 v8 s12|

Q20. In Exercise 2.2 Q.2, value at end of 5½ years of annuity due of Rs. 180 p.a. payable half-yearly for 12 years at 6% convertible half-yearly involves:
a) Working in half-yearly periods at 3% per half-year
b) Yearly periods at 6%
c) Quarterly conversion
d) Effective rate of 6.09%