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4. BUSI 1003 - Final Exam

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Course:             BUSI 1003                                                                       Section:  1H

Date:  Tuesday March 17, 2020                                              Time:     12:00-15:00

Professor:  Dr. Abdelghani Mehailia                                                     Duration: 3 Hrs.

Final Exam Instructions

·        Worth 35% of final grade

·        Marks: Part A: 60 marks; Part B: 75 marks

Part A

30 short answer questions worth 2 marks each. Total: 60 marks.

1.      In ordinary dating, are both the credit and discount periods measured with Day 1 being the invoice date or the day after?

2.      Is the contribution rate the difference between the selling price and the variable cost per unit?

3.      Is markup the difference between selling price and cost of buying plus expenses, or the sum of expenses and profit?

4.      Is the face value of a Treasury bill the present value or the future value?

5.      If an investment loses 30% in one year and gains 30% the following year, is there a net change in value?

6.      Given S = P(1+rt), solve for t.

7.      What is the meaning of the y-intercept in a cost function graph?

8.      What is the purpose of the consumer price index?

9.      If a company is operating beyond the breakeven point, then does each additional dollar of revenue add a dollar to the net income?

10.   Is the break-even volume, in units, a) the ratio of fixed cost per unit contribution margin or b) the ratio of selling price per unit contribution margin?

11.   If a loan has a 10-year amortization period with a fixed interest rate, will the interest paid in the eighth year be equal to the interest paid in the fifth year?

12.   Which type of annuity does the monthly payments of a rental agreement form? 

13.   With respect to when the balance will be paid off, does it matter when, in the term, a lump sum payment is made on the principal of a mortgage?

14.   Does skipping the 10th mortgage payment have the same consequence to lengthening the amortization period as skipping the 35th payment? 

15.   Can loan payments form either a general annuity or a simple annuity? 

16.   To compare the economic values of several alternative payments, can any point in time be chosen as the focal date? 

17.   In compound interest calculations, the compounding factor (or accumulation factor) depends on which 2 of the 3 following factors: the principal, the periodic rate of interest, the number of compounding periods in the term?

18.   In the present and future value formulas for constant growth annuities, if k=0, then are the formulas the same as those for ordinary annuities? 

19.   At the same nominal rate of interest, does a semiannually compounded rate have a lower or higher effective rate than a monthly compounded rate? 

20.   Can the size of size of regular payments of a mortgage be changed? 

21.   For an ordinary annuity with semi-annual payments, if the payments began on October 1, 2012, when will the seventh payment be made?

22.   If the prevailing market interest rate increases, does the purchase price of an annuity decrease or increase?

23.   When calculating the future value of an annuity due, is the end date at the beginning or end of the last payment interval? 

24.   For a given n, PMT and i, is the present value of a deferred annuity the same as the present value of an ordinary annuity? 

25.   Does a portability clause in the mortgage agreement mean that a purchaser may acquire the existing mortgage? 

26.   In a deferred annuity, is the original value or the future value used to calculate payments that commence at the end of the deferral period? 

27.   In loan amortization, does the ratio of principal to interest in each equal payment increase or decrease with time?

28.   Are the number of compoundings per year (conversions) and number of payments per year equivalent in a general annuity?

29.   Is there is a calculation for the future value of a perpetuity? 

30.   In solving an ordinary general annuity calculation, what interest rate is used?