Chapter 19

Interest is
1. The payment for a loan
2. The cost of capital
3. The price of money
4. All of these
If £200 is invested at 5% simple interest, after 3 years the total sum will be:
1. £210.00
2. £215.00
3. £230.00
4. £231.53
If £200 is invested at 5% compound for 3 years, the total amount will be:
1. £210.00
2. £215.00
3. £230.00
4. £231.53
£1000 to be received in 4 years time when interest rates are 10% is currently worth:
1. £600
2. £683
3. £909
4. £1000
A project gives net income of £500 in year 1 and £300 in year 2 for a cost now of £400. If interest rates are 5% what is the net present value?
1. £200
2. £348
3. £385
4. £400
A project has an NPV of £20000 at an interest rate of 10% and an NPV of -£5000 at an interest rate of 15%. Estimate the internal rate of return:
1. 11%
2. 13.3%
3. 14%
4. 14.6%
You need £50,000 in three years time and can get an 8% interest rate. How much should you save each year?
1. £3175
2. £15,401
3. £16,667
4. £24,038
A store card charges 1.75% per month on purchases, what is the APR?
1. 12.21%
2. 14.1%
3. 20.2%
4. 23.15%
A building society pays half of a percent per month on savings, what is the APR?
1. 0.5%
2. 6%
3. 6.17%
4. 79.59%
In making investment decisions you should bear in mind:
1. The time value of money
2. The payback period
3. The internal rate of return
4. At least one of these