FNCE10002 Principles of Finance Semester 1, 2019
Sample Mid Semester Exam 2 1
FNCE10002 Principles of Finance
Semester 1, 2019
Sample Mid Semester Exam 2
This sample exam and the mid semester exam are based on the material covered in weeks 1 – 4. The
exam duration is 60 minutes with no reading time. Detailed suggested answers to this sample exam will
be placed on the LMS in due course. On the mid semester exam, you will be required to enter your
answers on a multiple choice answer sheet (MCAS). A sample of the MCAS is available via the Mid
Semester Exam link. You will also be provided with adequate space for calculations, etc. in the exam
booklet.
1. You currently (at the end of year 0) have $10,000 invested in an investment fund and you plan
to add $300 to this fund at the end of every month. The fund is expected to earn an interest rate
of 12% p.a., compounded monthly. At the end of 5 years, the total dollar value in this investment
fund will be closest to:
A. $24,501.
B. $34,501.
C. $42,124.
D. $42,668.
2. The state government has just fined your company for breaches of the fire regulation act. It has
offered the following payment options to the company. If the interest rate appropriate for the
company is 10% p.a. and all cash flows occur at the end of the year, which payment option
should the company choose?
A. $550,000 now.
B. $150,000 per year for the next five years.
C. $900,000 at the end of year five.
D. $400,000 at the end of year one and $200,000 at the end of year two.
3. Your generous uncle has agreed to contribute towards funding your retirement. Specifically, he
will start with a contribution of $6,000 next year but this amount will then decline at a constant
rate of 3 percent per annum over the foreseeable future. If the interest rate appropriate for
valuing your uncle’s contribution is 12 percent per annum its present value today is closest to:
A. $38,800.
B. $40,000.
C. $50,000.
D. $66,667.
4. Suppose you plan to invest $10,000 in an investment fund at the end of every quarter for the
next five years. Assume that the first $10,000 will be invested next quarter. The fund is expected
to earn an annual return of 12% with returns compounded monthly. At the end of 5 years, the
total dollar value in this investment fund will be closest to:
