FMA Step 4 quiz

A building society adds interest monthly to investors' accounts even though interest rates are

expressed in annual terms. The current rate of interest is 6% per annum.

An investor deposits $1,000 on 1 January 20X1. How much interest will have been earned by 30

June 20X1?

• $30.00

• $30.38

• $60.00

• $300.00

Quality control of four independent production processes reveals the length of certain parts (in mm) to be as follows.

The process(es) with the largest relative variation, as measured by the coefficient of variation, is/are

• X only

• Z only

• X and Y

• W and Y

A normal distribution is to be split into four equal areas, two to the right of Z = 0 and two to the left of Z = 0 (Z = 0 at the mean).

Using normal distribution tables, the |Z| value that splits the area in this way is closest to

• 0.0987

• 0.1915

• 0.3333

• 0.6751

How much should be invested now (to the nearest $) to receive $24,000 per annum in perpetuity if the annual rate of interest is 5%?

• $1,200

• $25,200

• $120,000

• $120,000

A one-year investment yields a return of 15%. The cash returned from the investment, including principal and interest, is $2,070. What is the interest?

• $250

• $270

• $300

• $310.50

Which of the following mutually exclusive projects would you advise your client to undertake?

• Project 1

• Project 2

• Project 3

• Project 4

What is the 'internal rate of return' of an investment?

• What is the 'internal rate of return' of an investment?

• What is the 'internal rate of return' of an investment?

• The probability of making a profit on the investment

• The discount rate at which the net present value of the investment is zero

The NPV of an investment is $230 when the discount rate is 5% and $160 when it is 12%. Estimate the internal rate of return to the nearest whole percentage.
(a)   %

n investor is to receive an annuity of $19,260 for six years commencing at the end of year 1. It has a present value of $86,400. What is the rate of interest (to the nearest whole percent)?
(a)   %

Your company regularly uses material X and currently has in inventory 500 kgs for which it paid $1,500 two weeks ago. If this were to be sold as raw material, it could be sold today for $2.00 per kg. You are aware that the material can be bought on the open market for $3.25 per kg, but it must be purchased in quantities of 1,000 kgs.

You have been asked to determine the relevant cost of 600 kgs of material X to be used in a job for a customer.

What is the relevant cost of the 600kgs?

• $1,325

• $1,325

• $1,950

• $3,250