 2 
PART A – Each question is worth one mark. Indicate the correct answer in pencil on
the answer sheet.
)
5
ln

14
ln
(
3
1
(e)
5
ln

14
ln
(d)
)
5
ln

2
ln
(
3
(c)
)
5
ln

14
ln
(
3
(b)
)
5
ln

2
ln
(
3
1
(a)
equals
then x
6,
8

5e
If
.
1
3x
=
where ln denotes logarithm to base e, the exponential constant
.
2.
A sum of money is invested for 2 years. For the first year, the investment earns interest at the rate
of 5 % per annum compounded quarterly and for the second year, it earns 4% per annum
compounded monthly. If all interest earned in the first year is reinvested, the investment earns an
effective annual rate of interest of
(a)
9.38 %
(b)
4.58 %
(c)
4.68 %
(d)
4.93 %
(e)
4.50 %
3.
The investment cost in a DOTCOM company is $ 1.6 million. The expected net cash
flows are $ 100,000 at the end of the first year, $ 260,000 at the end of the second year
and $ 350,000 at the end of each of the following eight years. If an interest rate of 9% per
annum compounded annually applies, the net present value (NPV) of the investment
project is
(a)
$ 1,941,071.20
(b)
$ 1,560,000.00
(c)
$
337,186.96
(d)
$
341,071.20
(e)
$ 1,937,186.69
4.
To achieve a savings goal of $ 20,000 in three years’ time, an individual decides to make
12 equal deposits in a savings account at 3monthly intervals with the first deposit made
now. If the rate of interest earned by the savings account is 6% per annum compounded
quarterly, each deposit should be
(a)
$ 1,510.94
(b)
$ 1,533.60
(c)
$ 1,613.26
(d)
$ 1,834.46
(e)
$ 1,481.65
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