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IBF Assesment SP 20

This document provides the instructions and questions for an assessment in an Introduction to Business Finance course. It outlines that students must attempt all questions, calculations are allowed, and files must be submitted in the correct format with their name and ID by the deadline. The assessment contains 4 multiple part questions. Question 1 asks students to complete sentences about time value of money concepts and firm objectives and identify who the treasurer reports to. Question 2 involves compound interest calculations for different compounding frequencies. Question 3 calculates future values of deposits made periodically at different compounding frequencies. Question 4 involves choosing the best investment plan based on interest rate and compounding and explaining annuity and perpetuity concepts.

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53 views

IBF Assesment SP 20

This document provides the instructions and questions for an assessment in an Introduction to Business Finance course. It outlines that students must attempt all questions, calculations are allowed, and files must be submitted in the correct format with their name and ID by the deadline. The assessment contains 4 multiple part questions. Question 1 asks students to complete sentences about time value of money concepts and firm objectives and identify who the treasurer reports to. Question 2 involves compound interest calculations for different compounding frequencies. Question 3 calculates future values of deposits made periodically at different compounding frequencies. Question 4 involves choosing the best investment plan based on interest rate and compounding and explaining annuity and perpetuity concepts.

Uploaded by

anonymous dc
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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INSTITUTE OF BUSINESS MANAGEMENT

Assessment Paper–Spring 2020

Course Title: Introduction to Business Finance Course Code: FIN201


Faculty: Dr. Muhammad Ali Section: M-5893
Day / Date: Tuesday, March 24, 2020 Deadline: 25th March (23:59:59)
Total Marks: 15 Marks

Student’s Name:
Student ID:

Note:
 Attempt all questions.
 Use of scientific calculator is allowed.
 Annuity and mortgage tables are attached.
 Your file may be submitted in JPEG, PDF, and WORD format.
 Your response file must be saved with your NAME+ID.
 Do not copy your analysis from other sources. Write in your own words.
 Submit your response via LMS within the stipulated time. No extra will be awarded.
 Make sure the uploaded file is correct. Once submitted file will not be re-submit again.
 Show necessary calculations where it is required.
 Any issue related to LMS must be reported to me within the deadline with evidence.
 Do not wait for the last minute to submit your response.

Q:01 Complete the following sentences and give 2-3 liner justification in your own words
(02 Marks)

1. Time value of money concept explains that…….

2. The most appropriate objective of the firm is…….

3. The treasurer of a firm is most likely to report

4. The relationship between nominal and effective interest rate, if the compounding
frequency is more than one is……..

Q:02 The sum of $100,000 is invested in a project with an interest rate of 12 percent per year.
Use compound interest approach and determine:
a. The compound amount after 1 year, if interest is compounded semiannually? Interest is
compounded quarterly? (04 Marks)
b. Under which compounding plan is total interest is higher? Also mention by how much
amount?(1 Marks)

Q:03 A person wishes to deposit a certain amount per year for 5 years. If the rate of return is 12
percent per year, determine the amount to which the deposit will grow by the end of 5 years if:
a. Deposits of $20,000 are made at the end of each six-month period with interest
compounded semiannually.(1.5 Marks)
b. Deposits of $10,000 are made at the end of every quarter with interest compounded
quarterly.(1.5 Marks)

Q:04 Following are the list of questions which required logical answers. Your response will be
in your own words and the based on the concepts delivered in the class. Be specific and
conceptual.

a. Suppose that you are given investment plans from three difference banks. All banks offer
10 percent interest rate; bank A compounds monthly; bank B compounds quarterly; and
bank C compounds semi annually. Explain, which banks would you choose for
investment and why? (02 Marks)
b. Explain the concept of annuity and perpetuity? Give at least 2 examples of each. (01
Marks)
c. Is it logical and true that an ordinary annuity changes from one period to another period
and occurs at the end of the period? (02 Marks)

Good luck!

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