Deck 23: Annuities

Question 1

Calculate the value of an investment in which 1.9 million Uzbekistani Som (UZS) are invested each year, for 3 years, at 15% (to nearest UZS 10,000).

A) UZS 7.35 million
B) UZS 7.48 million
C) UZS 7.59 million
D) UZS 7.63 million

Answer 1

UZS 7.59 million

Question 2

A company in Lagos, Nigeria needs to repay a debt totalling 900,000 Nigerian Naira (NGN) in 3 years' time. Assume payments are made into a sinking fund in arrears and can be invested at 7.5%. How much must the company save in order to meet its commitments (to the nearest NGN 10)?

A) NGN 278,560
B) NGN 278,570
C) NGN 278,580
D) NGN 278,590

Answer 2

NGN 278,580

Question 3

Which of the following options is the BEST definition of an annuity?

A) A series of variable payments made over uniform time intervals
B) A series of variable payments made over variable time intervals
C) A series of fixed payments made over uniform time intervals
D) A series of fixed payments made over variable time intervals

Answer 3

A series of fixed payments made over uniform time intervals

Question 4

Use a geometric progression to calculate the value of an investment where 12 monthly payments of £250 are made with a nominal level of interest of 4.8% accrued monthly (to the nearest £1).

A) £3,079
B) £3,066
C) £3,057
D) £3,043

Question 5

€20,000 is borrowed over 3 years at 9.5% compounded. Calculate the annuity that must be paid into the sinking fund in order to meet this commitment, assume payments are made in arrears and can be invested at 4.5% (to the nearest €10).

A) €8,370
B) €8,380
C) €8,390
D) €8,400

Question 6

When setting up a depreciation schedule, which of the following values is not required?

A) Interest earned
B) Amount in fund
C) Purchase value of asset
D) Payment into fund (depreciation charge)

Question 7

The payment of a pension is an example of which type of annuity?

A) Perpetual
B) Certain and ordinary
C) Certain and due
D) Contingent

Question 8

Which of the following items is not a normal requirement for an amortization schedule?

A) Annual payment
B) Interest paid
C) Amount outstanding
D) Net present value of remaining amount

Question 9

A software company in Singapore fixes the rent for its office at 24,000 Singapore Dollars (SGD) per year payable in advance. Assuming a discount rate of 8%, calculate the total value of the payments in today's terms (to the nearest $10).

A) $221,830
B) $221,840
C) $221,850
D) $221,860

Question 10

A food processing plant in Poland takes out a loan of 1 million Polish Zloty (PLN) subject to interest at 6%. What must the annual payment be in order to pay the loan back in exactly 10 years (to the nearest 1 PLN)?

A) PLN 148,397
B) PLN 149,029
C) PLN 149,736
D) PLN 150,235