FIN2603 Assignment 2 (COMPLETE ANSWERS) Semester 2 2025

FIN2603: Financial Management
100 Multiple-Choice Questions with Answers
1. The future value of R5,000 invested today at 10% annual interest for 3 years is closest to:

A. R6,655

B. R6,050

C. R7,500

D. R5,500

✔ Correct Answer: A


2. The present value of R20,000 to be received in 4 years at 12% discount rate is closest to:

A. R12,732

B. R14,000

C. R15,000

D. R10,000

✔ Correct Answer: A


3. The process of finding the present value of future cash flows is called:

A. Amortisation

B. Discounting

C. Compounding

D. Capitalisation

✔ Correct Answer: B


4. An annuity due differs from an ordinary annuity because:

A. Payments occur at the end of period

, B. Payments occur at the beginning of period

C. Payments vary

D. Payments stop after 2 years

✔ Correct Answer: B


5. The effective annual rate (EAR) is always:

A. Less than the nominal rate

B. Equal to APR

C. Greater than or equal to nominal rate

D. Negative

✔ Correct Answer: C


6. If R1,000 grows to R1,331 in 3 years, the annual compound rate is:

A. 10%

B. 11%

C. 12%

D. 9%

✔ Correct Answer: A


7. The present value of perpetuity is equal to:

A. CF × (1/r)

B. CF ÷ r

C. CF × r

D. CF ÷ (1+r)

✔ Correct Answer: B


8. If interest is compounded semi-annually, the effective annual rate will be:

, A. Higher than nominal rate

B. Lower than nominal rate

C. Equal to nominal rate

D. Zero

✔ Correct Answer: A


9. The rule of 72 is used to estimate:

A. Future value

B. Payback period

C. Doubling time of investment

D. IRR

✔ Correct Answer: C


10. Discounting future cash flows helps in:

A. Ignoring time value

B. Valuing money at today’s worth

C. Inflating returns

D. Removing interest

✔ Correct Answer: B


11. The future value of R5,000 invested today at 10% annual interest for 3 years is closest
to:

A. R6,655

B. R6,050

C. R7,500

D. R5,500

✔ Correct Answer: A