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Understanding

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9 views

Understanding

master geometrical optics

Uploaded by

taskmask37
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
You are on page 1/ 5

BUS1003H: Introduction to Financial Risk

Test 2, 2023

Time allowed: 75 minutes.


Total marks: 40
Instructions:

• Answer Part 1 (Multiple-choice questions) and Part 2 (Long questions) on paper


• Answer on paper and show all your working, reasoning, and calculations in full.
Remember to define any symbols you introduce.
• Ensure that your submission is clearly marked including your name and group
number
• You are not allowed to use Excel, calculations should be done using a calculator

Section A: MCQ

Question 1

The present value on 1 September 2002 of payments of $280 due on 1 September 2004 and
$360 due on 1 March 2005, if the interest is 15% pa effective, is?
A. $327.23
B. $465.56
C.$473.21
D.$533.17
E. None of the above
[2]

Question 2
The present value as at 1 March 2005 of a series of payments of $1000 payable on the first
day of each month from April 2005 to December 2005 inclusive, assuming a rate of interest of
6% pa convertible monthly, is?
A. $8677
B. $9023
C. $7897
D. $8799
E. None of the above
[2]

Question 3
The present value of an annuity that pays $150 pa annually in arrears forever using an annual
effective rate of interest of 8% is?
A. $1676
B. $1708
C. $1875
D. $1853
E. None of the above

Question 4
Which of the following is not a core principle of the Actuaries’ Code?
A. Impartiality
B. Respect
C. Integrity
D. Communication
E. None of the above
[2]

Question 5
If the effective interest rate over every 18 months is 14.00%, what is the equivalent effective
interest rate per annum?
A. 6.30%
B. 7.00%
C. 8.55%
D. 9.13%
E. None of the above
[2]

Question 6
An interest rate of 15% p.a. convertible monthly is equivalent to which of the following annual
effective rates (round to 1 decimal places)?
a. 16.1% p.a.
b. 16.1% per month
c. 15% p.a.
d. 15.8 % p.a.
e. None of the above

Question 7
Which of the below is not true for the relationship between 𝑎𝑛̈ and 𝑎𝑛 ?

a. 𝑎̈ 𝑛 = 𝑉𝑎𝑛
b. 𝑎̈ 𝑛 = (1 + 𝑖)𝑎𝑛
c. 𝑉𝑎̈ 𝑛 = 𝑎𝑛
𝑎̈ 𝑛
d. = (1 + 𝑖)
𝑎𝑛
e. None of the above
Question 8

Which of the below is not true for the relationship between 𝑆𝑛̈ and 𝑆𝑛 ?

a. 𝑆𝑛̈ = 𝑉𝑆𝑛
b. 𝑉𝑆𝑛̈ = 𝑆𝑛
c. 𝑆𝑛̈ = (1 + 𝑖)𝑆𝑛
𝑆̈𝑛
d. = (1 + 𝑖)
𝑆𝑛
e. None of the above
Question 9
What is the value of 𝑎∞ at an interest rate of 14% p.a.?
a. R6.50
b. R7.15
c. R6.98
d. R7.51
e. None of the above

Question 10
What is the value of 2000𝑆20 at an interest rate of 10% p.a.?
a. R105,050
b. R110,500
c. R114,550
d. R116,650
e. None of the above

[Sub - Total 20]

Section B

Question 1
For the last 10 years a man has paid $50 at the start of each month into a savings account that
has achieved a real rate interest of 3% per annum over this period. If inflation has been at a
constant rate of 5% per annum, calculate the balance of the man’s account today. The real
rate of interest is real rate = (1+int rate)/(1+infl rate) – 1.
[3]

Question 2
You are a financial advisor, and your client has a son who is one years old exactly. Your client
wants to know what lump sum of money he must put away today in an interest-bearing
account to meet the cost of pre-school for his son.
His son will start pre-school at age two, for a duration of 3 years. The current school fees are
R36,000 for the year, paid in equal monthly instalments in arrears.
Calculate the lump sum as required by your client.
You make the following assumptions:
• School fees increase annually by 6%
• The current interest rate is 7% per annum and will remain at this level for the
next 12 months. Thereafter it will increase to 8% per annum for the next year,
and thereafter it will continue to increase by 1% per annum over 4 years until
reaching 12% per annum.
[9]

Question 3
Derive an expression for the present value of a payment of 1 payable annually in arrears and
increasing by r% every year for a period of n years given that the effective interest of the
period is i.
[3]

Question 4
You plan to accumulate $100 000 at the end of 42 years by making the following deposits: X
at the beginning of years 1 – 14, no deposits at the beginning of years 15 – 32; and Y at the
beginning of years 33 – 42. The annual effective interest rate is 7%. X-Y =100. Calculate Y.
[5]

[Sub -Total 20]


[Total 40]

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