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Calculate The Interest On

The document contains 20 multiple choice questions related to calculating interest rates, compound interest, bond prices, yields, and other finance concepts. The questions cover simple and compound interest calculations, determining interest rates based on given cash flows, calculating real rates of return, and pricing bonds using required rates of return.

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Robert ouma
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11 views

Calculate The Interest On

The document contains 20 multiple choice questions related to calculating interest rates, compound interest, bond prices, yields, and other finance concepts. The questions cover simple and compound interest calculations, determining interest rates based on given cash flows, calculating real rates of return, and pricing bonds using required rates of return.

Uploaded by

Robert ouma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1

Questions

Name

Date
2

Questions

1. Calculate the interest on $9500 at 7.2% simple interest for 3 years. (2)

I = P.T.R

I=interest

P= Principal

R= rate

(9500)(7.2/100)(3) = $2052

2. Calculate the interest on $15250 at 8.5% simple interest for 1 year and 3 months. (2)

(15250)(8.5/100)(15/12) = $1620.31

3. Calculate the total amount to be repaid on a loan of 17,350 euros at 8.1% simple interest for 240

days (3)

(17350)(8.1/100)(240/365) = $924.07

4. What is the simple interest rate if $13,500 earns $950 over 2 and a half years? (3)

R. (1350)(2.5) = 950

Rate = 2.81%

5. How long will it take to earn $2500 on a deposit of $15000 at 6.7 % simple interest? (2)

I = P.T.R

2500 = (15000)(T)(6.7/100)

2.48 = Time

It would take 2.48 years/ 29.76 months to earn $2500

6. 60% of the students of EBU in Switzerland are men. If there are 330 men studying, how many

students are there in total? (3)

60% = 330
3

100% = total =?

(100) (330/60) =550

7. Julian pays 24% of his income on rent and spends 15% on food. His rent is CHF 1500 per

month. What is his monthly salary and how much does he spend on food each month? (4)

24% = 1500 = rent

100% =total rent

(100)(1500/24) = 6250=total income

(15)(1500/24) =937.5=total on rent

8. You invest in a bond with a coupon of 7% at a price of 98.2% .what is your income yield? (2)

Yield = coupon amount/price

7/98.2

0.07

9. You hold a corporate zero-coupon bond which matures (at 100%) in one year. The company

pays 3.2 % above LIBOR.(London Inter-Bank Office Rate) for its borrowing. 12 months,

LIBOR is currently 3.8% . What is the sale price of the bond today?(3)

Price=M/(1+i)n

17350/(1+1.9)

50315

10. If the CPI rises from 143 to 147 and you invest at 8.25 % what is your real interest rate ?(3)
4

147-143=4= real return

11. If you receive $80 interest on a deposit of $ 1400 after a year and the inflation rate is 1.8 %,

what is your net profit in real terms? (3)

(1.8/100) (80)=1.44

80-1.44=78.56

78.56

12. What is 9% p.a simple interest compounded quarterly and monthly? (2)

A=P(1+R/4)4t

Quaterly=15250(1+0.09/4)4(15/12) = $20836.90

Monthly=15250(1+0.09/12)12(15/12) =$20850.69

13. What is 11% compounded continuously? (2)

Pert=Formula

r=0.11

pe=15250

15250e0.11(15/12)

21279.05

14. What is your account balance after investing 12000 euros at 7.25 % for 3 years with annual

compounding? (3)

P=12000

7.25%=rate

3=time
5

A=P(1+R)t

1200(1.0725)3

14803.80 Euros

15. Your Manor charge card charges interest at 1.3% per month. What is the AER ?(3)

AER= (1+r/n)n-1

(1+1.3/0.66)0.66-1

2.456%

16. If you invest CHF6,400 at 7.5 % p.a simple interest compounded continuously on 1 January,

what is the total you have on your account on 1st jul ?(3)

A=6400e 0.075(6/12)

A=6400e0.075(0.5)

A=3449.23

17. What is the combined value today (present value) of $2000 in one year and $ 3000 in two years

at constant discount rate of 12%? (4)

2000/(1+0.12) +3000/(1+0.12)2

25785.71

18. UBS has a bond which matures in two years with a coupon of 3.5%. The required rate of return

on UBS’s two-year debt is 4.25 %. What is the theoretical price of the bond? (5)

3.5=(x/15000)0.5 -1

$303750

19. Establish the cash flows for USD 120000 nominal of a three-year bond with an 8% coupon. If

the borrowers required rate of return is 9%, what would you expect the price of the bond to be

(as a percentage)? (5)


6

Bond price= C (1-(1+r)-n/r) + F/(1+r)n

0.08(1-(1+0.09)-2.48/0.09) + 120000/(1+0.09)2.48

$9690.89

20. A company has a one –year zero coupon bond in USD priced at 93.25% What is the implied

required rate of return for the company’s one-year debt? (3)

Zero c.=maturtity value/(1+i)n

93.25/(1+8.1)

197.06

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