Finance and Economics Quiz Questions

Solving for t in a financial equation

Part A

1. Given S = P(1+rt), solve for t

1. What is the meaning of the y-intercept in a cost function graph?    

2. What is the purpose of the consumer price index

3. If a company is operating beyond the breakeven point, then does each additional dollar of revenue add a dollar to the net income?  

4. Is the break-even volume, in units, a) the ratio of fixed cost per unit contribution margin or b) the ratio of selling price per unit contribution margin?   

5. In ordinary dating, are both the credit and discount periods measured with Day 1 being the invoice date or the day after

6. Is the contribution rate the difference between the selling price and the variable cost per unit

7. Is markup the difference between selling price and cost of buying plus expenses, or the sum of expenses and profit?

8. Is the face value of a Treasury bill the present value or the future value?

9. If an investment loses 30% in one year and gains 30% the following year, is there a net change in value

10. To compare the economic values of several alternative payments, can any point in time be chosen as the focal date?

11. In compound interest calculations, the compounding factor (or accumulation factor) depends on which 2 of the 3 following factors: the principal, the periodic rate of interest, the number of compounding periods in the term 

12. In the present and future value formulas for constant growth annuities, if k=0, then are the formulas the same as those for ordinary annuities?

13. At the same nominal rate of interest, does a semiannually compounded rate have a lower or higher effective rate than a monthly compounded rate?

14. Can the size of size of regular payments of a mortgage be changed?

15. If a loan has a 10-year amortization period with a fixed interest rate, will the interest paid in the eighth year be equal to the interest paid in the fiftear?  16. Which type of annuity does the monthly payments of a rental agreement form

17. With respect to when the balance will be paid off, does it matter when, in the term, a lump sum payment is made on the principal of a mortgage 

18. Does skipping the 10th mortgage payment have the same consequence to lengthening the amortization period as skipping the 35th payment?

19. Can loan payments form either a general annuity or a simple annuity?

20. In loan amortization, does the ratio of principal to interest in each equal payment increase or decrease with time 

What the y-intercept means in a cost function graph

21. Are the number of compounding per year (conversions) and number of payments per year equivalent in a general annuity

22. Is there is a calculation for the future value of a perpetuity?

23. In solving an ordinary general annuity calculation, what interest rate is used

24. For an ordinary annuity with semi-annual payments, if the payments began on October 1, 2012, when will the seventh payment be made

25. If the prevailing market interest rate increases, does the purchase price of an annuity decrease or increase

26. When calculating the future value of an annuity due, is the end date at the beginning or end of the last payment interval

27. For a given n, PMT and i, is the present value of a deferred annuity the same as the present value of an ordinary annuity

28. Does a portability clause in the mortgage agreement mean that a purchaser may acquire the existing mortgage

29. In a deferred annuity, is the original value or the future value used to calculate payments that commence at the end of the deferral period

1. Jason works in a retail computer store. He receives a weekly base salary of $400 plus a commission of 3% of sales exceeding his quota of $20,000 per week. What are his total sales for a week in which he earns $700000

30. Arcelor Mittal Dofasco can buy iron ore pellets from Minnesota at US$130 per short ton (2000 pounds) or from Labrador at C$175 per metric ton (1000 kg). Which source is more expensive and by how much in C$ per metric ton?   

(1 pound = 0.4536 kg, C$1.1400 = US$1.00)

Weight and currency calculations should be to 4 decimal places; final answer rounded to the nearest cent.

Determine the price of Minnesota ore in C$ per metric to

31. Central Ski and Cycle purchased 50 pairs of ski boots for $450 per pair less 30% and 10%. The regular rate of markup on selling price of the boots is 50%. The store’s overhead is 25% of the selling price. During a January clearance sale, the price was reduced to $425 per pair. What is the rate of markdown and what was the profit or loss on each pair of boots at the

32. Ramon wishes to replace payments of $900 due today and $500 due in 22 months by a single equivalent payment 18 months from now. If money is worth 4.8% compounded monthly, what should that payment be

33. Rounded to the nearest quarter year, how long will it take an investment to quadruple if it earns 9% compounded semi-annually?         

34. A life insurance company pays investors 6% compounded annually on its five-year GICs. For you to be indifferent as to which compounding option you choose, what would the nominal rates have to be on GICs with quarterly compounding                                                                                                                  

35. A rental agreement requires the payment of $900 at the beginning of each month. What single payment at the beginning of the rental year should the landlord accept instead of twelve-monthly payments if money is worth 6% compounded monthly

36. Roger Baker has accumulated $600,000 in his RRSP and is going to purchase a 25-year annuity from which he will receive month-end payments. The money used to purchase the annuity will earn 4.8% compounded monthly. If payments grow by 2.4% compounded monthly, what will be the initial payment?                37. What amount is required to fund a perpetuity that pays $10,000 at the beginning of each quarter? The funds can be invested to earn 5% compounded quarter

38. The first quarterly payment of $750 in a five-year annuity will be paid 3.5 years from now. Based on a discount rate of 8.25% compounded monthly, what is the present value of the payments today?   

39. Semiannual payments are required on an $80,000 loan at 8.0% compounded annually. The loan has an amortization period of 15 years. Calculate the interest component of Payment                                                                                                           

40. If a furniture retailer offers a financing plan on a $1500 purchase requiring four equal quarterly payments of $400 including the first payment on the purchase date, what effective rate of interest is being charged on the unpaid balance?