FIN2601 EXAM PACK EXAM Q AND A.

FIN2601 Exam Questions 1. You have been offered a project paying R3 000 at the end of each year for the next 20 years. What is the maximum amount of money you would invest in this project if you expect an 8 percent rate of return on your investment? 1. R13 953,49 2. R29 454,00 Answer is 2 3. R49 497,00 4. R137 286,00 Workings: PMT = 3 000 N = 20 I = 8 FV = 0 Comp PV Or manually: ( ) = 3000 X 9,818 = 29454,00 2. You invested R4 000 annually (at the end of each year) for 5 successive years in a savings account at 15% per annum compounded interest. At the end of the fifth year you withdraw R10 000 and the balance is invested at 10% per annum compound interest for 5 years. What will the approximate end value of the investment be? 1. R18 318 2. R25146 3. R27 330 Answer is 3 4. R29 340 Workings: PMT = -4000 N = 5 I = 15 PV = 0 Comp FV = 26 969,525 26 969,525 – 10 000 = 16 969,525 PV = 16 969,525 N = 5 I = 10 PMT = 0 Comp FV = 27 329, Page 2 of 116 Or manually ( ) = 4000 X 6,742 = 26 968 26 968 – 10 000 = 16 968 = 16 968 X 1,611 = 27335,4 3. An investor invests R2000 annually (at the beginning of each year) for five successive years into a savings account paying 10 percent compound interest per annum. At the end of the year, he withdraws R2 210, 22 of the accumulated amount and reinvests the balance into an account paying 12 percent interest per annum compounded monthly for two years. The end value of his investment will be closest to. 1. R12 544,00 2. R12 796,35 3. R14 247,69 Answer 4. R15 226,08 Workings: Mode: Beginning PMT: -2000 N = 5 I = 10 PV = 0 Comp FV = 13 431, 22 13 431, 22 – 2 210, 22 = 11 221 Mode: End PV = -11 221 I = 12/12 = 1 N = 2 X 12 = 24 PMT = 0 Comp FV = 14 247, 4. You will receive an amount of R1 700 eight (8) years from now. However, if you could receive the amount right now and invest it, you would be able to earn 8% interest per annum on the amount. What would the amount be worth if you could receive it now instead of waiting eight year. 1. R 819 2. R 918 Answer 3. R1 564 4. R1700