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Q:

$10,000 face value strip bond has 15 years remaining until maturity. If the prevailing market rate of return is 6.5% compounded semiannually, what is the fair market value of the strip bond?

A) 1710.29	B) 2710.29
C) 3710.29	D) 4710.29

Answer & Explanation Answer: C) 3710.29

Explanation:

i=j/m

n =m(Term) = 2(15.5) =31

Fair market value Present value of the face value

=FV(1+ i)^-n

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Filed Under: Compound Interest
Exam Prep: Bank Exams
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Q:

A $1000 face value Series S50 compound interest Canada Savings Bond (CSB) was presented to a credit union branch for redemption.What amount did the owner receive if the redemption was requested on:January 17, 2001?

A) 1206	B) 1306
C) 1406	D) 1506

Answer & Explanation Answer: B) 1306

Explanation:

I = ptr

Therefore, the total amount the owner received on January 17, 2001 was

$1295.57 + $10.47 = $1306.04

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Filed Under: Compound Interest
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Q:

In a box, there are 5 black pens, 3 white pens and 4 red pens. In how many ways can 2 black pens, 2 white pens and 2 red pens can be chosen?

A) 180	B) 220
C) 240	D) 160

Answer & Explanation Answer: A) 180

Explanation:

Number of ways of choosing 2 black pens from 5 black pens in $5 C_{2}$ ways.

Number of ways of choosing 2 white pens from 3 white pens in $3 C_{2}$ ways.

Number of ways of choosing 2 red pens from 4 red pens in $4 C_{2}$ ways.

By the Counting Principle, 2 black pens, 2 white pens, and 2 red pens can be chosen in 10 x 3 x 6 =180 ways.

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Q:

A chartered bank offers a five-year Escalator Guaranteed Investment Certificate.In successive years it pays annual interest rates of 4%, 4.5%, 5%, 5.5%, and 6%, respectively, compounded at the end of each year. The bank also offers regular five-year GICs paying a fixed rate of 5% compounded annually. Calculate and compare the maturity values of $1000 invested in each type of GIC. (Note that 5% is the average of the five successive one-year rates paid on the Escalator GIC.)

A) 1276.28	B) 1234
C) 1278	D) 1256

Answer & Explanation Answer: A) 1276.28

Explanation:

FV = $1000(1.04)(1.045)(1.05)(1.055)(1.06) = $1276.14

the maturity value of the regular GIC is

FV = $ 1000 x ${(1.05)}^{5}$ = $1276.28

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Filed Under: Compound Interest
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Q:

What periodic payment will an investor receive from a $9000, four-year, monthly payment GIC earning a nominal rate of 5.25% compounded monthly?

A) 29.38	B) 39.38
C) 49.38	D) 59.38

Answer & Explanation Answer: B) 39.38

Explanation:

i=j/m

The monthly payment will be=PV*I

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Filed Under: Compound Interest
Exam Prep: Bank Exams
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Q:

Find the number of subsets of the set {1,2,3,4,5,6,7,8,9,10,11} having 4 elements.

A) 340	B) 370
C) 320	D) 330

Answer & Explanation Answer: D) 330

Explanation:

Here the order of choosing the elements doesn’t matter and this is a problem in combinations.

We have to find the number of ways of choosing 4 elements of this set which has 11 elements.

This can be done in 11 $C_{4}$ ways = 330 ways

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Filed Under: Permutations and Combinations

Q:

In how many ways can 4 girls and 5 boys be arranged in a row so that all the four girls are together ?

A) 18000	B) 17280
C) 17829	D) 18270

Answer & Explanation Answer: B) 17280

Explanation:

Let 4 girls be one unit and now there are 6 units in all.

They can be arranged in 6! ways.

In each of these arrangements 4 girls can be arranged in 4! ways.

Total number of arrangements in which girls are always together = 6! x 4!= 720 x 24 = 17280

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Filed Under: Permutations and Combinations

Q:

Mr. and Mrs. Espedido’s property taxes, amounting to $2450, are due on July 1.What amount should the city accept if the taxes are paid eight months in advance and the city can earn 6% compounded monthly on surplus funds?

A) 2354.17	B) 2354
C) 2376	D) 2389

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