Chapter 4 Flashcards
1
Q
In time value of money calculations, where the present value is £10,000, the interest rate is 5.5% and the time frame for investment is 8 years, 'r' is: Select one: a. 0.055. b. 8 c. £10,000. d. 5.5%.
A
a. 0.055.
SEE CHAPTER 4A1
2
Q
Dave has £300,000 in a bank account paying nominal interest of 4.5% per annum. Interest is credited monthly and he intends to draw out capital and interest each month for six years, at which time the account will be exhausted. If he withdraws an equal amount each month, to the nearest pound he will withdraw: Select one: a. £4,762. b. £7,638. c. £6,300. d. £4,592.
A
a. £4,762.
SEE CHAPTER 4A4A
3
Q
How much needs to be invested as a lump sum to provide an annual payment of interest and capital of £100 at the end of each year for 10 years, if the interest rate is 8% per year? Select one: a. £671. b. £1,800. c. £1,471. d. £1,671.
A
a. £671.
SEE CHAPTER 4A4A
4
Q
What is the APR on a loan where interest is charged at the rate of 24% a year on a monthly basis? Select one: a. 26.82%. b. 24.94%. c. 12.47%. d. 48.02%.
A
a. 26.82%
SEE CHAPTER 4A3A
5
Q
What is the effective annual rate of interest, where the nominal rate is 10% and interest is calculated daily? Select one: a. 10.52%. b. 10.47%. c. 10.25%. d. 10%.
A
a. 10.52%.
SEE CHAPTER 4A3
6
Q
Assuming an annual interest rate of 3%, what amount does Peter need to invest now in order to reach the sum of £25,000 in 5 years’ time to purchase a new car? Select one: a. £19,129.11. b. £22,834.28. c. £20,888.12. d. £21,565.22
A
d. £21,565.22
SEE CHAPTER 4A2
7
Q
If £1,000 is invested with an interest rate of 5% compound, how much will be available at the end of year 2? Select one: a. £1,250. b. £1,100. c. £1,102.50. d. £1,050.
A
c. £1,102.50.
SEE CHAPTER 4A2
8
Q
Simone is working out the compound interest for the accumulation of a capital sum. In order to calculate this she does NOT need to know the: Select one: a. interest rate payable. b. present value. c. future value. d. time frame of the investment.
A
c. future value.
SEE CHAPTER 4A2
9
Q
Madge has a 3 year loan with an annual interest rate of 23% payable on a monthly basis. What is the APR? Select one: a. 25.59%. b. 30.75%. c. 24.81%. d. 25.85%.
A
a. 25.59%
SEE CHAPTER 4A3A
10
Q
A sum of £2,000 invested over 5 years with an interest rate of 5% compound would be worth how much at the end of the term? Select one: a. £2,500. b. £2,680.19. c. £3,000. d. £2,552.56.
A
d. £2,552.56.
SEE CHAPTER 4A2
11
Q
A building society account pays an interest rate of 4.5% per annum, compounded on a monthly basis. What will the annual equivalent rate be? Select one: a. 4.57%. b. 4.55%. c. 4.59%. d. 4.61%.
A
c. 4.59%.
SEE CHAPTER 4A3A
12
Q
On 1 September 2013 Anna invested £15,000 in a fixed rate investment paying 4% for four years; on 1 September 2017 she reinvested the resultant sum for a further two years at a fixed rate of 5%. How much will she receive on 1 September 2019? Select one: a. £19,346. b. £20,101. c. £18,900. d. £19,140.
A
a. £19,346.
SEE CHAPTER 4A2
13
Q
A bank account pays an interest rate of 3.6% per annum, compounded on a monthly basis. What will the annual equivalent rate be? Select one: a. 3.96%. b. 3.72%. c. 3.66%. d. 3.62%.
A
c. 3.66%.
SEE CHAPTER 4A3A
14
Q
On 1 July 2014 Henry invested £20,000 in a fixed rate investment paying 3% for four years. On 1 July 2018 he reinvests the resultant sum for a further three years at a fixed rate of 5%. How much will he receive on 1 July 2021? Select one: a. £25,760. b. £24,597. c. £26,058. d. £28,142.
A
c. £26,058.
SEE CHAPTER 4A2
15
Q
Henry's bank is offering a fixed rate deposit of 4% over seven years. How much will he need to invest on day one to accumulate exactly £5,000 at the end of the fixed term? Select one: a. £3,799.59. b. £3,906.25. c. £3,951.57. d. £3,600.
A
a. £3,799.59.
SEE CHAPTER 4A4
16
Q
James invested £6,000 into his unit trust seven years ago and it is now worth £9,954. What average annual compound rate of return has he received on this investment? Select one: a. 13.5%. b. 6.5%. c. 9.4%. d. 7.5%.
A
d. 7.5%.
SEE CHAPTER 4A2
17
Q
On 1 November 2015 Sally invests £10,000 in a fixed rate investment paying 4% for three years; on 1 November 2018 she reinvests the resultant sum for a further four years at a fixed rate of 6%. How much will she receive on 1 November 2022? Select one: a. £14,201. b. £13,933. c. £23,874. d. £15,306.
A
a. £14,201.
SEE CHAPTER 4A2
18
Q
A bank account pays an interest rate of 5% per annum, compounded on a quarterly basis. What will the annual equivalent rate be? Select one: a. 5.25%. b. 5.09%. c. 5.12%. d. 4.91%.
A
b. 5.09%.
SEE CHAPTER 4A3A
19
Q
Warren invested £8,000 into his unit trust six years ago and it is now worth £12,837. What average annual compound rate of return has he received on this investment? Select one: a. 10.08%. b. 9.92%. c. 5.47%. d. 8.2%.
A
d. 8.2%.
SEE CHAPTER 4A2
20
Q
What amount has to be invested to accumulate £1,000 at the end of 5 years at an annual interest rate of 5% compound? Select one: a. £801.24. b. £783.53. c. £746.27. d. £942.34.
A
b. £783.53.
SEE CHAPTER 4A4
21
Q
If the nominal rate of return on an investment is 6% and inflation is 3%, what is the approximate real rate of return? Select one: a. 3%. b. 4.5%. c. 3.5%. d. 4%.
A
a. 3%.
SEE CHAPTER 4B
22
Q
If interest is payable monthly at a nominal rate of 6% per annum, what is the effective annual rate? Select one: a. 6.17%. b. 6%. c. 6.27%. d. 6.12%.
A
a. 6.17%.
SEE CHAPTER 4A3
23
Q
If £100 is invested at the end of each year at an interest rate of 8% a year for 10 years, what will be the accumulated or future value at the end of 10 years? Select one: a. £1,627.39. b. £1,564.55. c. £1,448.66. d. £1,600.
A
c. £1,448.66.
SEE CHAPTER 4A4A
24
Q
In time value of money calculations, where the present value is £20,000, the interest rate is 8.2% and the time frame for investment is 10 years, 'n' is: Select one: a. 8.2%. b. £20,000. c. 0.082. d. 10.
A
d. 10.
SEE CHAPTER 4A1
25
Q
What is the effective annual rate of interest, where the nominal rate is 10% and interest is calculated half-yearly? Select one: a. 10%. b. 10.52%. c. 10.38%. d. 10.25%.
A
d. 10.25%.
SEE CHAPTER 4A3
26
Q
What is the APR on Simon's credit card where interest is charged at the rate of 18% a year on a monthly basis? Select one: a. 20.16%. b. 19.56%. c. 19.86%. d. 19.46%.
A
b. 19.56%
SEE CHAPTER 4A3A
27
Q
Jim has a structured product that pays 145% of the amount invested at the end of 5 years. What is the AER? Select one: a. 7.71%. b. 9.54%. c. 8.83%. d. 7%.
A
a. 7.71%.
SEE CHAPTER 4A2/4A3A
28
Q
Simon has a fund of £65,000 but wishes for this to grow to £100,000 in seven years' time. What rate of compound annual interest is required? Select one: a. 6.5%. b. 6.66%. c. 6.15%. d. 6.35%.
A
d. 6.35%.
SEE CHAPTER 4A2
29
Q
Michelle has a credit card account; her interest rate will usually be expressed as: Select one: a. APR. b. YPR. c. YER. d. AER.
A
a. APR.
SEE CHAPTER 4A3A
30
Q
On 1 October 2014 Sarah invests £25,000 in a fixed rate investment paying 4% for three years; on 1 October 2017 she reinvests the resultant sum for a further six years at a fixed rate of 5%. How much will she receive on 1 October 2023, to the nearest pound? Select one: a. £35,500. b. £37,686. c. £36,619. d. £36,623.
A
b. £37,686.
SEE CHAPTER 4A2
31
Q
A deposit account pays an interest rate of 6% per annum, compounded on a monthly basis. What will the annual equivalent rate be? Select one: a. 6.7%. b. 6.17%. c. 6.96%. d. 6.13%.
A
b. 6.17%.
SEE CHAPTER 4A3A
32
Q
What is the annual percentage rate on a loan, where interest is charged at the rate of 18% a year on a monthly basis? Select one: a. 25.44%. b. 22.5%. c. 18%. d. 19.56%.
A
d. 19.56%.
SEE CHAPTER 4A3A
33
Q
Brian's grandparents plan to gift him £5,000 on his 18th birthday. Assuming they can achieve a net annual return of 4%, how much will they need to invest on his 13th birthday, to the nearest pound? Select one: a. £4,000. b. £4,167. c. £3,951. d. £4,110.
A
d. £4,110.
SEE CHAPTER 4A4
34
Q
Michael's parents plan to gift him £10,000 on his 21st birthday. Assuming they can achieve a net annual return of 5%, how much will they need to invest on his 15th birthday? Select one: a. £7,000. b. £7,835. c. £7,462. d. £7,692.
A
c. £7,462.
SEE CHAPTER 4A4
35
Q
Simon wishes to invest a sum of money at an interest rate of 3.5% per annum to provide him with a capital lump sum of £8,000 in five years' time. How much will he need to invest now to achieve this? Select one: a. £6,900.72. b. £6,971.68. c. £6,507.77. d. £6,735.79.
A
d. £6,735.79.
SEE CHAPTER 4A4
36
Q
A lump sum of £15,000 is invested for three years at 4% and then for a further three years at 3.5%. To the nearest pound, what will the investment be worth at the end of the term? Select one: a. £17,988. b. £18,075. c. £18,707. d. £18,978.
A
c. £18,707.
SEE CHAPTER 4A2
37
Q
The nominal interest rate on a loan is 10% per annum. Interest charged at which frequency will lead to the HIGHEST annual percentage rate? Select one: a. Monthly. b. Daily. c. Quarterly. d. Half-yearly.
A
b. Daily.
SEE CHAPTER 4A3A
38
Q
Stella invests £20,000 into a unit trust and after five years it is worth £26,263.32. What average annual rate of return has she received on this investment? Select one: a. 6.26%. b. 15.2%. c. 5.6%. d. 4.64%.
A
c. 5.6%.
SEE CHAPTER 4A2
