Time Value of Money

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Chapter 4 Time value of money Multiple-choice questions 4.1 What will my investment of R100 500 be worth if my bank pays me simple interest of 9% per annum and I invest my money for 180 days? a) R4 460,55 b) R96 039,45 c) R100 550,25 d) R104 960,55 4.2 A client approaches you with the news that she plans to retire on a ranch worth R3 000 000. She plans to save every year for 20 years. How much must she save at the end of each year if the interest rate is 12% per annum? (Round off the answer to the nearest rand.). a) R36 800 b) R39 000 c) R41 600 d) R43 400 4.3 Miriam took a bond of R250 000 over a 25 year period at 10% per annum. What will the customer’s outstanding balance be after 12 years if she makes monthly instalments? a) R1 654,43 b) R52 085,57 c) R197 913,98 d) R275 046,43 4.4 I am planning to attend a European Champions soccer match in Brazil. The travel agent estimates the cost for the week to be R50 000. If I receive 7,5% interest per annum compounded monthly, how long will it take me to save the amount if I deposit R15 000 now and R1 000 thereafter at the end of every month? (Round off the answer to the nearest decimal.) a) 8 b) 16 c) 24 d) 32 4.5 What is the difference between R2 000 invested at 12% p.a. compounded interest for one year if: i) Interest is calculated semi-annually, and ii) Interest is calculated monthly? a) R0,00 b) R3,35 c) R6,45 d) R13,65 4.6 The value of the nominal rate if the effective rate is 16% compounded semi-annually is closest to ... a) 8,00% b) 15,00% c) 18,00% d) 32,00% 4.7 Calculate the effective interest rate if the nominal interest rate earned on an investment is 10% per annum but interest is calculated at the end of each month. (Round off the answer to the

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