CIMA BA1 · Chapter 13 · Question 9 of 10
A business borrows $30,000 at 7% a year, to be repaid by four equal instalments at the end of each year. What is the amount of each instalment (to the nearest dollar)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $8,857
Explanation
The loan equals the present value of the instalments. Four-year annuity factor at 7% = (1 - 1.07^-4) / 0.07 = 3.3872. Instalment = 30,000 / 3.387211 = $8,857 (rounded).
More The time value of money MCQs
- Q1$8,000 is invested at 5% a year simple interest for 4 years. What will the investment be worth at the end of the period?
- Q2$5,000 is invested at 6% a year compound interest. What will it be worth after 3 years (to the nearest cent)?
- Q3A loan charges interest of 2% per quarter, compounded quarterly. What is the effective annual rate of interest (to two decimal places)?
- Q4What is the present value of $12,000 receivable in three years' time if the discount rate is 8% a year (to the nearest cent)?
- Q5What is the present value of $4,000 received at the end of each year for five years, discounted at 10% a year (to the nearest cent)?