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Q:

Payments of $2000 and $1000 were originally scheduled to be paid one year and five years, respectively, from today. They are to be replaced by a $1500 payment due four years from today, and another payment due two years from today. The replacement stream must be economically equivalent to the scheduled stream. What is the unknown payment, if money can earn 7% compounded semiannually?

A) 1548	B) 1348
C) 1648	D) 1748

Answer & Explanation Answer: C) 1648

Explanation:

FV1 = Future value of $2000, 1 year later
= PV (1+ i)^n

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Filed Under: Compound Interest
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Q:

The Indian Cricket team consists of 16 players. It includes 2 wicket keepers and 5 bowlers. In how many ways can a cricket eleven be selected if we have to select 1 wicket keeper and atleast 4 bowlers?

A) 1024	B) 1900
C) 2000	D) 1092

Answer & Explanation Answer: D) 1092

Explanation:

We are to choose 11 players including 1 wicket keeper and 4 bowlers or, 1 wicket keeper and 5 bowlers.

Number of ways of selecting 1 wicket keeper, 4 bowlers and 6 other players in $2 C_{1} * 5 C_{4} * 9 C_{6}$ = 840

Number of ways of selecting 1 wicket keeper, 5 bowlers and 5 other players in $2 C_{1} * 5 C_{5} * 9 C_{5}$ =252

Total number of ways of selecting the team = 840 + 252 = 1092

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Q:

The population of a rural region is expected to fall by 2% per year for the next 10 years. If the region’s current population is 100,000, what is the expected population 10 years from now?

A) 81707	B) 91707
C) 61707	D) 71707

Answer & Explanation Answer: A) 81707

Explanation:

i=j/m

FV = PV(1 + i)^n

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Q:

If the rate of inflation for the next 20 years is 2.5% per year, what annual income will be needed 20 years from now to have the same purchasing power as a $30,000 annual income today?

A) 39158	B) 49158
C) 59158	D) 69158

Answer & Explanation Answer: B) 49158

Explanation:

i=j/m

FV = PV(1+ i)^n

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Q:

A five-year promissory note with a face value of $3500, bearing interest at 11% compounded semiannually, was sold 21 months after its issue date to yield the buyer 10% compounded quarterly.What amount was paid for the note

A) 4336.93	B) 5336
C) 6336	D) 7336

Answer & Explanation Answer: A) 4336.93

Explanation:

i=j/m

Maturity value = PV(1 + i)^n

Term = 5 years - 21 months= 3.25 years

Price paid = FV(1+ i )^-n

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Q:

A committee of 5 persons is to be formed from 6 men and 4 women. In how many ways can this be done when at least 2 women are included ?

A) 196	B) 186
C) 190	D) 200

Answer & Explanation Answer: B) 186

Explanation:

When at least 2 women are included.

The committee may consist of 3 women, 2 men : It can be done in $4 C_{3} * 6 C_{2}$ ways

or, 4 women, 1 man : It can be done in $4 C_{4} * 6 C_{1}$ ways

or, 2 women, 3 men : It can be done in $4 C_{2} * 6 C_{3}$ ways.

Total number of ways of forming the committees

= $4 C_{2} * 6 C_{3} + 4 C_{3} * 6 C_{2} + 4 C_{4} * 6 C_{1}$

= 6 x 20 + 4 x 15 + 1x 6

= 120 + 60 + 6 =186

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Filed Under: Permutations and Combinations

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
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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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