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Thread: Free CFA Level 1 practice question bank for June 2011 exam

  1. #21
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    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
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    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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  2. #22
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    Ans 7 is B

  3. #23
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    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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  4. #24
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    Quote Originally Posted by DG Mod View Post
    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.

    ================================================== =====================================
    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.

  5. #25
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    [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

  6. #26
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    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.

  7. #27
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    Quote Originally Posted by Takalani View Post
    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

  8. #28
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    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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  9. #29
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    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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  10. #30
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    A11 - b

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