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Basics of Financial Mathematics Test 2

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Basics of Financial Mathematics Test 2
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  • Question 1
    1 / -0
    If payment of security is paid as $$ $100$$ at end of year for three years, it is an example of
    Solution
    The amount of the annuity is the sum of all payments.
    such security payment type in which payments are made at equal intervals of time and every payment amount is same is classified as annuity.
    If payment of security is paid as $100 at end of year for three years, it is an example of annuity.
  • Question 2
    1 / -0
    Security payment type in which payments are made at equal intervals of time and every payment amount is same is classified as _______________.
    Solution
    An annuity is a series of equal payments in equal time periods. Usually, the time period is $$1$$ year, which is why it is called an annuity, but the time period can be shorter, or even longer. These equal payments are called the periodic rent. The amount of the annuity is the sum of all payments.
    such security payment type in which payments are made at equal intervals of time and every payment amount is same is classified as annuity.
  • Question 3
    1 / -0
    Which of the following is an example of annuity contingent ?
    Solution
    $$\Rightarrow$$  $$Daughter's\,\,Marriage$$ is an example of annuity contingent. 
    $$\Rightarrow$$  Annuity contingent is an annuity arrangement in which the beneficiary does not begin receiving payments until a specified event occurs.
     $$\Rightarrow$$  A contingent annuity may be set up to begin sending payments to a beneficiary upon the death of another individual who wishes to ensure financial stability for the beneficiary, or upon retirement or disablement of the beneficiary.
    $$\Rightarrow$$  Car loan and House loan is not an example of annuity contingent, it's an example of annuity certain.
  • Question 4
    1 / -0
    Which option is an example of interest on interest?
    Solution
    Compound interest is an example of interest on interest.
  • Question 5
    1 / -0
    The _______ is the percentage of a sum of money charged for its use.
    Solution
    The $$\underline{\text{rate of interest}}$$ is the percentage of a sum of money charged for its use.
  • Question 6
    1 / -0
    _________ is interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.
    Solution
    Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

    So $$Op.B$$
  • Question 7
    1 / -0
    Identify in which type of interest rate is applied to the original principal and any accumulated interest?
    Solution
    When the interest rate is applied to the original principal and any accumulated interest, this is called compound interest.
  • Question 8
    1 / -0
    Annuity, where the payments start after specified no. of periods, is known as
    Solution
    An annuity which begins payments only after a period is a deferred annuity
    Annuity, where the payments start after specified no. of periods, is known as Deferred annuity.
  • Question 9
    1 / -0
    __________ is calculated on both the amount borrowed and any previous interest.
    Solution
    Compound interest is calculated on both the amount borrowed and any previous interest.
  • Question 10
    1 / -0
    If the account statement states that the interest is compounded annually, then $$n =$$ ?
    Solution
    If the account statement states that the interest is compounded annually then $$n = 1$$.
    Annually means $$1$$ year.
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