Its a multiple choice of a total of ten question uitiple choice. Choose the answ

Question

Its a multiple choice of a total of ten question

uitiple choice. Choose the answe 1. The maintenance cost of a car increases by $22 each year. This cash flow pattern is best described by which of the following statements? (a) Geometric series (b) Gradient series (c) Infinte series (d) Uniform series A principal sum, P, is invested at a nominal interest rate "r" and compounded "m" times per year for "n" years. What amount, F, will be accumulated at the end of this period? 2. id P(i+ (d) P1 + An annuity is defined as: (a) An earned interest due at the end of each interest period (b) An amount of interest earned by the principal amount per unit of time. (c) A series of equal cash flows occurring at equal periods of time (d) All of above Which of the following statements is not true? (a) Simple interest is to be used only in simple decision situations. (b) Compounded interest involves computing interest on top of interest (c) Simple interest is rare in practical situations of borrowing and loaning (d) If the interest is not stated is as being simple or compounded, we assume the latter An interest rate expressed as "1.5% per month is exactly the same as (a) 4.5% per quarter effective interest (b) 18% effective interest per year (c) 18% per year compounded monthly (d) None of the above A young engineer calculated that monthly payments of $A are required to pay off a loan SP for n years at i%, compounded monthly. If the enginner decides to borrow $2P instead, her monthly payments will be $2A (a) Cannot be determined with the given information (b) It depends on the cash flows (c) True (d) False You place $100 per month into an account that earns 1% per month, which of the following expressions can be used to calculate the account's after 3 years: (a) P-100(P/A,1963) (b) F-100(P/A,1%,36)(F/P,196,36) 3. 4. 5. 6. 7, (c) F-100(1 0.01)" 1/0.01 (d) Fal00(EA, 12.68963) A situation where the annual interest rate is 5%, when continuous compounding is used rather than monthly compounding, the nominal interest rate (a) Increases (b) Remains the same (c) Decreases (d) Cannot be determined with the given information 8,

Explanation / Answer

Question 1

This is called "Gradient series" as payment per month is a fixed amount. Option b is correct.

Question 2

F = P (1 + r/m)mn

Option D is correct

Question 3

Here option c is correct as " A series of cash flows occuring at equal period of time."

Question 4

Option D is wrong here

Question 5

Option c is correct here

Question 6

Here the statement is true as the PMT is proportional to the principal amount or loan amount. So the statement is true.

Question 7

Option b is correct here.

Question 8

In this case the nominal interest rate will increase as time periods are increasing.

Question 9

It is false as in right hand side the time periods are different than left hand side. Option D is correct.

Question 10

THe statement is true here.

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