fm2_exercises1_topic1
TRANSCRIPT
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A111 BWFF2023 Financial Management 2 (Group E) Hamdan Amer Al-Jaii
Topic 1Time value of money
Exercise 1
1 At !" compounded annuall#$ %o& long &ill it ta'e *0 to dou+le,A)
.* #ear/
B)
! mont%/
)
#ear/
) 12 #ear/
2 At &%at rate mu/t 00 +e compounded annuall# or it to gro& to1.0 in 10 #ear/,A)
"
B)
*"
)
"
)
!"
3 4ou &i/% to +orro& 2$000 to +e repaid in 12 mont%l# in/tallment/ o1!.12. 5%e annual intere/t rate i/6
A)
2".
B)
!".
)
1!".
)
12".
7 #ou %a8e 20$000 in an account earning !" annuall#$ &%at con/tantamount could #ou &it%dra& eac% #ear and %a8e not%ing remaining at t%eend o i8e #ear/,A)
3$*2*.2
B)
*$00!.
1
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3$0!.!!
)
2$*.!
* 7 #ou in8e/t *0 e8er# /i9 mont%/ at !" compounded /emi-annuall#$%o& muc% &ould #ou accumulate at t%e end o 10 #ear/,A)
10$0*
B)
10$13
)
22$33
)
21$31
A riend plan/ to +u# a +ig-/creen 5:;entertainment /#/tem and can
aord to /et a/ide 1$320 to&ard t%e purc%a/e toda#. 7 #our riend canearn *.0"$ %o& muc% can #our riend /pend in our #ear/ on t%epurc%a/e,
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12
)
1
W%ic% o t%e ollo&ing pro8ide/ t%e greate/t annual intere/t,A)
10" compounded annuall#
B)
.*" compounded mont%l#
)
" compounded >uarterl#
)
!.*" compounded dail#
10
7 #ou place *0 in a /a8ing/ account &it% an intere/t rate o "compounded &ee'l#$ &%at &ill t%e in8e/tment +e &ort% at t%e endo i8e #ear/ (round to t%e neare/t dollar),
A)
2
B)
0
)
1
)
*
11 7 #ou %a8e 3*$000 in an account earning " annuall#$ &%at con/tantamount could #ou &it%dra& eac% #ear and %a8e not%ing remaining at t%eend o 20 #ear/,A)
1!$*0
B)
$12
)
*$**
)
1$0!0
12
?%ort# Jone/ &ant/ to +u# a one-&a# +u/ tic'et to Mule-?nort$@enn/#l8ania. 5%e tic'et co/t/ 12$ +ut Mr. Jone/ %a/ onl# !0. 7 ?%ort#put/ t%e mone# in an account t%at pa#/ " intere/t compoundedmont%l#$ %o& man# mont%/ mu/t ?%ort# &ait until %e %a/ 12 (round tot%e neare/t mont%),A)
3 mont%/
B * mont%/
3
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mont%/
)
mont%/
13
W%en comparing annuit# due to ordinar# annuitie/$ annuit# dueannuitie/ &ill %a8e %ig%er6A)
pre/ent 8alue/.
B)
annuit# pa#ment/.
)
uture 8alue/.
)
+ot% a and c.
1
W%at i/ t%e pre/ent 8alue o 12$*00 to +e recei8ed 10 #ear/ romtoda#, A//ume a di/count rate o !" compounded annuall# and round tot%e neare/t 10.A)
*$0
B)
11$*
)
$210
)
1$010
1*
5%e pre/ent 8alue o a perpetuit# decrea/e/ &%en t%e decrea/e/.
A)
num+er o in8e/tment period/
B)
annual di/count rate
)
perpetuit# pa#ment
)
+ot% + and c
1 W%at i/ t%e pre/ent 8alue o 2*0 recei8ed at t%e +eginning o eac% #earor 21 #ear/, A//ume t%at t%e ir/t pa#ment i/ recei8ed toda#. /e adi/count rate o 12"$ and round #our An/&er to t%e neare/t 10.A)
1$!0
B)
2$00
2$11
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3$23
1
5%e annual percentage #ield i/ al/o reerred to a/ t%e6
A)
>uoted rate.
B)
nominal rate.
)
eecti8e annual rate.
)
all o t%e a+o8e.
1!
7ngrid Birdman can earn a nominal annual rate o return o 12"$compounded /emiannuall#. 7 7ngrid made 0 con/ecuti8e /emiannualdepo/it/ o *00 eac%$ &it% t%e ir/t depo/it +eing made toda#$ %o&muc% &ill /%e accumulate at t%e end o 4ear 20, uarterl# or 20 #ear/ at !"$ &e mu/t u/e6
A)
0 period/ at ".
B)
i8e period/ at 12".
)
10 period/ at ".
)
!0 period/ at 2".
20
4ou +oug%t a painting 10 #ear/ ago a/ an in8e/tment. 4ou originall# paid!*$000 or it. 7 #ou /old it or !$0*0$ &%at &a/ #our annual return onin8e/tment,A)
"
B)
."
1"
*
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12.!"