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

1. 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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2. Ans 7 is B

3. 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. 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.

5. [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. 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. 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

8. 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. 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. A11 - b