CIMA BA2 · Chapter 12 · Question 6 of 13
$20,000 is invested for 5 years at 6% a year compound interest. What is the value of the investment at the end of 5 years, to the nearest $?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $26,765
Explanation
Future value = $20,000 x (1.06)^5 = $20,000 x 1.3382 = $26,765 to the nearest $. Simple interest would give only $20,000 + (5 x $1,200) = $26,000.
More Investment appraisal MCQs
- Q8Which of the following is a disadvantage of the PAYBACK method of investment appraisal?
- Q9Using the net present value method, when should an independent project be accepted?
- Q10Which of the following should be EXCLUDED from the cash flows used in a net present value calculation?
- Q11A lender charges interest of 1.5% per month, compounded monthly. What is the equivalent annual interest rate, to two decimal places?
- Q12What is the INTERNAL RATE OF RETURN of a project?