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SMA 2207 (SAMPLE EXAM QUESTIONS)

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11 views

SMA 2207 (SAMPLE EXAM QUESTIONS)

Uploaded by

bhoiswapnil39
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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SMA 2207-SAMPLE EXAM QUESTIONS

a) A rate of interest of 4 % p.a convertible monthly is equivalent to what annual effective


rate of discount? [2 marks]
b) John invested a certain sum of money at 8 % p.a simple interest for n years. At the
end of n years, John got back 4 times his original investment. What is the value of n?
[3 marks]
3
c) Express 𝑑4 as a function of i [4 marks]
d) At an effective annual rate of 𝑖, a payment of 121 now (immediately) and another 121
at the end of the year has the same present value as a payment of 169 at the end of
two years and another 169 at the end of three years. Calculate the present value of
these two cashflows. [4 marks]
e) Given a nominal interest rate of 7.5% convertible semiannually, determine the force
of interest, 𝛿 and nominal discount rate compounded monthly, 𝑑12 . [5 marks]
f) A man invests X on the birthdate of his daughter to provide a payment of 20 on her
birthday forever. If the annual effective rate of interest is 5%, calculate X. [2 marks]
g) $6,600 is invested at time 0 and the proceeds at time 10 are $10,600. Calculate
𝐴 (7,10) if 𝐴 (0,9) = 1.8, 𝐴(2,4) = 1.1, 𝐴(2,7) = 1.32, 𝐴(4,9) = 1.45. [6 Marks]

h) Given that:
0.04 , 0 ≤ 𝑡 < 6
𝛿(𝑡) = {
0.2 − 0.02𝑡 , 6 ≤ 𝑡 < 9

Find the accumulated value at time 8 of a payment of 400 at time 3. [4 marks]

i) An annuity provides payments of 6000 at the end of each month forever. If the interest
rate is 10% p.a. convertible quarterly, calculate the present value of the annuity?
[5 marks]
j) Show that

[5 marks]
k) Assuming an interest rate of 12% per annum convertible monthly
a. Calculate the combined present value of an immediate annuity payable
monthly in arrears such that payments are$ 1,000 per annum for the first 6
years and $ 400 per annum for the next 4 years, together with a lumpsum of $
2,000 at the end of the 10 years. [4 marks]
b. Calculate the amount of the level annuity payable continuously for 10 years
having the same present value as in (i) above [3 marks]
c. Calculate the accumulated values of the first 7 years’ payments at the end of
the 7th year for the payments in (i) and (ii) above [3 mark]
l) I pay 100 into an account today. The account pays simple interest at rate of 4% per
annum. How much will I have in my account in five years’ time? [2 marks]
m) Calculate the total present value as at 1 June 2008 of payments of 100 on 1 January
st st

2009 and 200 on 1st May 2009, assuming a rate of 12% convertible quarterly.
[3 marks]
n) The force of interest at time t is given by:

0.01 + 0.01𝑡, 0 ≤ 𝑡 < 4


𝛿(𝑡) = { 0.15 − 0.003𝑡, 4 ≤ 𝑡 < 6
0.06 𝑡≥6

Find an expression for the value at time t=0 of a payment of 100 at time t
[5 marks]
o) A payment of 100 is received at time 3 and a further payment of 250 is received at
time 5. Calculate the accumulated value of these payments at time 8.
[7 marks]

p) Jerry makes deposits at the end of each quarter for 10 years. At the end of 15 years,
Jerry uses the fund to make annual payments of Y at the beginning of each year for 4
years after which the fund is exhausted. The annual effective rate of interest is 7%.
Determine Y. [3 marks]
q) Calculate the present value of an annuity payable annually in advance for a term of
20 years such that the payment is 500 in year 1, 550 in year 2, 600 in year 3, etc.
Assume a rate of interest of 5% for the first twelve years and 7% per annum
thereafter. [5 marks]
r) A bank lends a company 6500 at a fixed rate of interest of 10% p.a. The loan is to be
repayed by 5 level annual payments. Calculate the interest and capital repayment at
each repayment date. [8 marks]

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