# Free CFA Level 1 practice question bank for June 2011 exam

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• 16-02-2011, 09:29 AM
DG Mod
Q6 Ans B:

Price = D/(rate) => rate = D/P = 8/95 = 8.42%

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Today's Question (Questions and answers provided by
Knowledge Varsity)

Q7. You have just purchased a life insurance policy in which you have to make 40 semiannual payments of \$350 each, the first payment is due in 6 months. There is a guarantee to provide effective annual rate of 8.16% interest per annum (semi-annual compounding). The policy will mature at the end of 20 years, and insurance co. will make the first payment after 1 year of maturity in 10 equal annual payments. How much you will receive at the each payment.

A. \$4,724
B. \$5,792
C. \$4,992

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• 16-02-2011, 10:27 PM
naveen
Ans 7 is B
• 17-02-2011, 01:28 PM
DG Mod
Q7 Ans C:

Here the effective annual rate is mentioned, so first compute the periodic rate, so the periodic rate is 4%.
The problem should be broken into 2 parts, first find the FV of the investment and then from this FV find out the PMT that the insurance company should provide.

1st Part : PMT = -350, PV = 0, I/Y = 4, N = 40 => FV = 33,258.93

2nd Part: FV of the last part now becomes the PV, here the FV will be zero as no amount remains with the insurance company, find the PMT.

FV = 0; PV = -33,258.93, I/Y = 8.16%, N = 10, CPT->PMT = 4,992
Remember in 2nd part we should use 8.16% as that is the effective annual rate that is being committed by the insurance co.

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Today's Question (Questions and answers provided by Knowledge Varsity)

Q8. You have taken a mortgage loan of Rs. 10,00,000 at 12% interest rate for 15 years. The payment is to be done monthly. How much cumulative principal payment you would have done in the first 2 installment.

A. 24,000
B. 4023.37
C. 2001.68

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• 17-02-2011, 03:36 PM
anita123
Quote:

Originally Posted by DG Mod
Q7 Ans C:

Here the effective annual rate is mentioned, so first compute the periodic rate, so the periodic rate is 4%.
The problem should be broken into 2 parts, first find the FV of the investment and then from this FV find out the PMT that the insurance company should provide.

1st Part : PMT = -350, PV = 0, I/Y = 4, N = 40 => FV = 33,258.93

2nd Part: FV of the last part now becomes the PV, here the FV will be zero as no amount remains with the insurance company, find the PMT.

FV = 0; PV = -33,258.93, I/Y = 8.16%, N = 10, CPT->PMT = 4,992
Remember in 2nd part we should use 8.16% as that is the effective annual rate that is being committed by the insurance co.

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Today's Question (Questions and answers provided by Knowledge Varsity)

Q8. You have taken a mortgage loan of Rs. 10,00,000 at 12% interest rate for 15 years. The payment is to be done monthly. How much cumulative principal payment you would have done in the first 2 installment.

A. 24,000
B. 4023.37
C. 2001.68

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Q.8

The principal payments at the beginning of any repayment is much lower and then increase progressively. I think the answer is B.
• 18-02-2011, 10:27 AM
Daulat Guru
[COLOR=DarkRed]Q8 Ans B:

PV = -10,00,000; I/Y = 1; N = 180; FV = 0 => PMT = 12,001.68

For finding out the cumulative payment done; there are 3 options; easiest here would be to find out the principal paid in the 1st and 2nd installment.

1st installment: interest accrued = 0.01*10,00,000 = 10,000
So principal paid = 12,001.68
• 18-02-2011, 02:21 PM
Takalani
Wonder if its possible for Candidates to Get PDF copy with all questions Discussed during the Year
Mybe get them a month before exam for rev purposes.
• 19-02-2011, 11:19 AM
Quote:

Originally Posted by Takalani
Wonder if its possible for Candidates to Get PDF copy with all questions Discussed during the Year
Mybe get them a month before exam for rev purposes.

Hi Takalani,

We had posted the consolidated PDF for the last initiative (Dec 2010). You can find it here:
http://www.daulatguru.com/finance-fo...ull=1#post1549

We are still collecting questions for the June 2011 initiative. So it's not possible to publish that PDF file now.

Thanks,
Team DG
• 19-02-2011, 11:48 AM
Daulat Guru
Q9 Ans B:

FV = \$1million ; I/Y = 7%; N =30; PV =0; CPT->PMT = -10,586.4

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Today's Question (Questions and answers provided by Knowledge Varsity)

Q10. I want to retire at the end of 20 years, after my retirement I would like to spend \$5000 monthly, I expect to live 30 years after my retirement, how much should i start saving monthly in my retirement account every month, starting from next month? My retirement account will produce 7% p.a. compounded monthly?

A. \$1,443
B. \$1,434
C. \$1,526

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• 20-02-2011, 02:18 PM
Q10 Ans A:

Find out the PV at the retirement of the retirement amount => PV = 751,537
Now this becomes the FV for the earning period=> Find PMT= 1,442.69

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Today's Question (Questions and answers provided by Knowledge Varsity)

Q11. If I save \$10,000 at the beginning of each year for the next 10 years, how much sum I would accumulate at the end of 10 years? Assume the interest rate is 8% per annum compounded annually?

A. \$144,866
B. \$156,455
C. \$168,971

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• 20-02-2011, 06:44 PM
sfernezian
A11 - b
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