UKEQ1013 Quantitative Techniques I

UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF ACCOUNTANCY AND MANAGEMENT
ACADEMIC YEAR 2015/2016
TUTORIAL 7 (Questions)
Discussion Questions
1. At what interest rate will a sum of RM 2000 become RM 2320 in 3 years?
(a) In the case of simple interest
(b) In the case of compound interest
2. How long will it take for RM600 to amount to RM700 if invested at 8.5%
compounded quarterly?
3. (a) How much would an investment of RM 1,500 accumulate to in three years if
interest were paid at 6 percent per annum for the first year, 8 percent per annum for
the second year and 10 percent per annum for the third year?
(b) A principal, RM 15,000 is invested at 6 percent annual interest rate for 8 years.
Determine its future value if it is compounded semi-annually.
(c) What is the effective annual rate if a bank charges you 7.64% compounded
quarterly?
4. Your parents are planning to retire in 15 years. They currently have RM 250,000 and
they would like to have RM 1,200,000 when they retire. What annual rate of interest
would they have to earn on their RM 250,000 in order to reach their goal.
5. You just started your first job and you want to buy a house within 3 years. You are
currently saving for the down payment. You plan to save RM 5,000 the first year. You
also anticipate that the amount you save each year will rise by 10 percent a year as
your salary increases over time. Interest rates are assumed to be 5 percent and all
savings occur at year end. Sketch the time line. How much money will you have for a
down payment in 3 years?
6. John wants to further his study at overseas university for his master degree in 5 years.
In order to accumulate the money for his further study, he has the following sources
of funds: (i) He has fixed deposit of RM5,000 now that paying 8% interest rate
compounded quarterly. (ii) Year 1, his grandfather will give him RM5,000 and he will
deposit the money into his fixed deposit. Determine the total accumulated amount at
the end of fifth year.
7. You are offered RM1,000 today or RM25,000 in 25 years. Assuming that you can
earn 11 percent on your money, which should you choose? (Answer: RM25,000)
Self-Practice Questions

UKEQ1013 Quantitative Techniques I

1. Find the 15th term and the sum of the first 15 terms of the progression:
4, 7, 10, 13, .
(Answer: 46, 375)
2. Find the 8th term and the sum of the first 8 terms of the progression:
1, 3, 5, 7, 9, 11, .
(Answer: 15, 64)
3. Find the 8th term and the sum of the first 8 terms of the geometric progression:
1, 1.05, (1.05)2, (1.05)3, ..
(Answer: 1.4071, 9.5491)
4. RM 1,250 is invested at 8 percent simple interest. How much will have accrued after
4 years? (Answer: RM 1,650)
5. Find the amount of:
(a) RM 500 compounded at 12 percent over 5 years.
(b) RM 800 compounded at 9 percent over 6 years.

(Answer: RM 881.17)
(Answer: RM 1,341.68)

6. A sum of RM 800 has been invested at an interest rate of 12 percent per annum for 5
years. What is the value of this investment, if the interest rate is paid as simple
interest and compounded each year? (Answer: RM 1,280.00 and RM 1,409.87)
7. Find the effective interest rate corresponding to the given nominal rate.
(a) 20 percent compounded semiannually
(Answer: 21%)
(b) 20 percent compounded quarterly
(Answer: 21.55%)
(c) 20 percent compounded monthly
(Answer: 21.94%)
(d) 20 percent compounded daily
(Answer: 22.13%)
8. Find the accumulated amount after 3 years if RM 2,500 is invested at 10 percent per
year compounded.
(a) annually
(b) semi-annually
(c) quarterly (d) monthly (e) daily
Answer: (a) RM3,327.50
(b) RM3,350.24
RM3,370.45 (e) RM3,374.51

(c) RM3,362.22

(d)

9. Over a five-year period, an original principal of RM3,000 accumulated to

RM3,572.83 in an account in which interest was compounded monthly. Determine the
interest rate.
(Answer: 3.5%)