100 IMPORTANT MULTIPLE CHOICE QUESTIONS WITH ANSWERS RELATED TO ANNUITIES; CAPITALISATION AND RATE OF CAPITALISATION
An annuity is a series of equal payments made at:
a) Regular intervals
b) Irregular intervals
c) Random intervals
d) Increasing intervals
Answer: a) Regular intervals
What is the process of determining the present value of a future sum called?
a) Capitalization
b) Annuity
c) Sinking fund
d) Redemption
Answer: a) Capitalization
The rate at which interest is compounded is known as the:
a) Capitalization rate
b) Annuity rate
c) Sinking fund rate
d) Redemption rate
Answer: a) Capitalization rate
What does the term “years purchase” refer to?
a) The number of years it takes to pay off a loan
b) The number of years it takes for an investment to double in value
c) The number of years of future income used to value an asset
d) The number of years it takes to accumulate a sinking fund
Answer: c) The number of years of future income used to value an asset
A sinking fund is a fund created to:
a) Pay off a debt or obligation
b) Invest in annuities
c) Capitalize future income
d) Purchase assets at the end of their useful life
Answer: a) Pay off a debt or obligation
The redemption of capital refers to:
a) The repayment of a loan or debt
b) The purchase of an annuity
c) The calculation of future income
d) The increase in the value of an investment
Answer: a) The repayment of a loan or debt
What is the reversionary value?
a) The value of an asset at the time of its purchase
b) The value of an asset at the end of its useful life
c) The value of an annuity at the time of redemption
d) The value of a sinking fund at the time of capitalization
Answer: b) The value of an asset at the end of its useful life
In an annuity, the regular intervals between payments are typically:
a) Annual
b) Monthly
c) Quarterly
d) Daily
Answer: a) Annual
The process of determining the future value of an investment is called:
a) Capitalization
b) Annuity
c) Sinking fund
d) Redemption
Answer: a) Capitalization
What is the formula to calculate the present value of an annuity?
a) PV = FV × (1 + r)^n
b) PV = FV / (1 + r)^n
c) PV = FV × r^n
d) PV = FV / r^n
Answer: b) PV = FV / (1 + r)^n
The rate of capitalization is usually expressed as a:
a) Percentage
b) Dollar amount
c) Ratio
d) Time period
Answer: a) Percentage
Years purchase is also known as the:
a) Discount factor
b) Capitalization factor
c) Redemption factor
d) Sinking fund factor
Answer: b) Capitalization factor
A sinking fund is set up to accumulate funds to:
a) Purchase annuities
b) Pay off a debt
c) Capitalize future income
d) Redeem shares of stock
Answer: b) Pay off a debt
The redemption of capital is the process of:
a) Repaying a loan or debt
b) Calculating the future value of an annuity
c) Capitalizing future income
d) Purchasing assets at the end of their useful life
Answer: a) Repaying a loan or debt
Reversionary value is the value of an asset at the:
a) Beginning of its useful life
b) End of its useful life
c) Time of capitalization
d) Time of redemption
Answer: b) End of its useful life
Which of the following is an example of an annuity?
a) A lump sum payment received at the end of a project
b) Monthly mortgage payments
c) A one-time capital investment
d) Stock dividends received annually
Answer: b) Monthly mortgage payments
The process of determining the present value of a future sum is known as:
a) Capitalization
b) Annuity
c) Sinking fund
d) Discounting
Answer: d) Discounting
What is the formula to calculate the future value of an investment?
a) FV = PV × (1 + r)^n
b) FV = PV / (1 + r)^n
c) FV = PV × r^n
d) FV = PV / r^n
Answer: a) FV = PV × (1 + r)^n
The rate at which interest is compounded annually is an example of the:
a) Capitalization rate
b) Annuity rate
c) Sinking fund rate
d) Redemption rate
Answer: a) Capitalization rate
Years purchase is a factor used to determine the present value of an asset based on its:
a) Future income
b) Historical income
c) Replacement cost
d) Resale value
Answer: a) Future income
A sinking fund is typically established by:
a) Individuals for personal savings
b) Corporations for employee pensions
c) Governments for infrastructure projects
d) All of the above
Answer: d) All of the above
The redemption of capital is the process of:
a) Redeeming shares of stock
b) Paying off a debt or loan
c) Calculating future annuity payments
d) Establishing a sinking fund
Answer: b) Paying off a debt or loan
The reversionary value of an asset is the value at the end of its:
a) Expected useful life
b) Expected income period
c) Expected capitalization period
d) Expected annuity period
Answer: a) Expected useful life
In an annuity, the regular payments are made at equal intervals of:
a) Time
b) Amount
c) Interest rate
d) Capitalization period
Answer: a) Time
What is the formula to calculate the future value of an annuity?
a) FV = PV × (1 + r)^n
b) FV = PV / (1 + r)^n
c) FV = PV × r^n
d) FV = PV / r^n
Answer: a) FV = PV × (1 + r)^n
The rate of capitalization is typically expressed as a:
a) Percentage
b) Dollar amount
c) Ratio
d) Time period
Answer: a) Percentage
Years purchase is a factor used to calculate the present value of an asset based on its expected:
a) Cost
b) Market value
c) Income stream
d) Appreciation rate
Answer: c) Income stream
A sinking fund is designed to accumulate funds to:
a) Purchase annuities
b) Pay off a debt or loan
c) Invest in stocks and bonds
d) Capitalize future income
Answer: b) Pay off a debt or loan
The redemption of capital refers to the:
a) Repayment of a loan or debt
b) Purchase of an annuity
c) Calculation of future income
d) Increase in the value of an investment
Answer: a) Repayment of a loan or debt
Reversionary value is the value of an asset at the end of its:
a) Useful life
b) Capitalization period
c) Amortization period
d) Annuity term
Answer: a) Useful life
Which of the following is an example of an annuity?
a) Winning the lottery
b) Selling a house
c) Receiving monthly rent payments
d) Buying stocks
Answer: c) Receiving monthly rent payments
The process of determining the present value of a future sum of money is known as:
a) Capitalization
b) Amortization
c) Sinking fund
d) Discounting
Answer: d) Discounting
What is the formula to calculate the present value of a future sum?
a) PV = FV × (1 + r)^n
b) PV = FV / (1 + r)^n
c) PV = FV × r^n
d) PV = FV / r^n
Answer: b) PV = FV / (1 + r)^n
The rate at which interest is compounded annually is called the:
a) Capitalization rate
b) Amortization rate
c) Sinking fund rate
d) Discount rate
Answer: a) Capitalization rate
Years purchase is a concept used to value an asset based on its expected:
a) Income stream
b) Appreciation rate
c) Replacement cost
d) Resale value
Answer: a) Income stream
A sinking fund is a fund set up to:
a) Invest in stocks and bonds
b) Purchase annuities
c) Pay off a debt or loan
d) Capitalize future income
Answer: c) Pay off a debt or loan
The redemption of capital refers to the:
a) Repayment of a loan or debt
b) Purchase of an annuity
c) Calculation of future income
d) Increase in the value of an investment
Answer: a) Repayment of a loan or debt
Reversionary value is the value of an asset at the:
a) Beginning of its useful life
b) End of its useful life
c) Time of capitalization
d) Time of redemption
Answer: b) End of its useful life
In an annuity, the regular payments are made at equal intervals of:
a) Time
b) Amount
c) Interest rate
d) Capitalization period
Answer: a) Time
What is the formula to calculate the future value of an annuity?
a) FV = PV × (1 + r)^n
b) FV = PV / (1 + r)^n
c) FV = PV × r^n
d) FV = PV / r^n
Answer: a) FV = PV × (1 + r)^n
The rate of capitalization is typically expressed as a:
a) Percentage
b) Dollar amount
c) Ratio
d) Time period
Answer: a) Percentage
Years purchase is a factor used to calculate the present value of an asset based on its expected:
a) Cost
b) Market value
c) Income stream
d) Appreciation rate
Answer: c) Income stream
A sinking fund is designed to accumulate funds to:
a) Purchase annuities
b) Pay off a debt or loan
c) Invest in stocks and bonds
d) Capitalize future income
Answer: b) Pay off a debt or loan
The redemption of capital refers to the:
a) Repayment of a loan or debt
b) Purchase of an annuity
c) Calculation of future income
d) Increase in the value of an investment
Answer: a) Repayment of a loan or debt
Reversionary value is the value of an asset at the end of its:
a) Useful life
b) Capitalization period
c) Amortization period
d) Annuity term
Answer: a) Useful life
Which of the following is an example of an annuity?
a) Winning the lottery
b) Selling a house
c) Receiving monthly rent payments
d) Buying stocks
Answer: c) Receiving monthly rent payments
The process of determining the present value of a future sum of money is known as:
a) Capitalization
b) Amortization
c) Sinking fund
d) Discounting
Answer: d) Discounting
What is the formula to calculate the present value of a future sum?
a) PV = FV × (1 + r)^n
b) PV = FV / (1 + r)^n
c) PV = FV × r^n
d) PV = FV / r^n
Answer: b) PV = FV / (1 + r)^n
The rate at which interest is compounded annually is called the:
a) Capitalization rate
b) Amortization rate
c) Sinking fund rate
d) Discount rate
Answer: a) Capitalization rate
Years purchase is a concept used to value an asset based on its expected:
a) Income stream
b) Appreciation rate
c) Replacement cost
d) Resale value
Answer: a) Income stream
A sinking fund is a fund set up to:
a) Invest in stocks and bonds
b) Purchase annuities
c) Pay off a debt or loan
d) Capitalize future income
Answer: c) Pay off a debt or loan
The redemption of capital refers to the:
a) Repayment of a loan or debt
b) Purchase of an annuity
c) Calculation of future income
d) Increase in the value of an investment
Answer: a) Repayment of a loan or debt
Reversionary value is the value of an asset at the:
a) Beginning of its useful life
b) End of its useful life
c) Time of capitalization
d) Time of redemption
Answer: b) End of its useful life
In an annuity, the regular payments are made at equal intervals of:
a) Time
b) Amount
c) Interest rate
d) Capitalization period
Answer: a) Time
What is the formula to calculate the future value of an annuity?
a) FV = PV × (1 + r)^n
b) FV = PV / (1 + r)^n
c) FV = PV × r^n
d) FV = PV / r^n
Answer: a) FV = PV × (1 + r)^n
The rate of capitalization is typically expressed as a:
a) Percentage
b) Dollar amount
c) Ratio
d) Time period
Answer: a) Percentage
Years purchase is a factor used to calculate the present value of an asset based on its expected:
a) Cost
b) Market value
c) Income stream
d) Appreciation rate
Answer: c) Income stream
A sinking fund is designed to accumulate funds to:
a) Purchase annuities
b) Pay off a debt or loan
c) Invest in stocks and bonds
d) Capitalize future income
Answer: b) Pay off a debt or loan
The redemption of capital refers to the:
a) Repayment of a loan or debt
b) Purchase of an annuity
c) Calculation of future income
d) Increase in the value of an investment
Answer: a) Repayment of a loan or debt
Reversionary value is the value of an asset at the end of its:
a) Useful life
b) Capitalization period
c) Amortization period
d) Annuity term
Answer: a) Useful life
Which of the following is an example of an annuity?
a) Winning the lottery
b) Selling a house
c) Receiving monthly rent payments
d) Buying stocks
Answer: c) Receiving monthly rent payments
The process of determining the present value of a future sum of money is known as:
a) Capitalization
b) Amortization
c) Sinking fund
d) Discounting
Answer: d) Discounting
What is the formula to calculate the present value of a future sum?
a) PV = FV × (1 + r)^n
b) PV = FV / (1 + r)^n
c) PV = FV × r^n
d) PV = FV / r^n
Answer: b) PV = FV / (1 + r)^n
The rate at which interest is compounded annually is called the:
a) Capitalization rate
b) Amortization rate
c) Sinking fund rate
d) Discount rate
Answer: a) Capitalization rate
Years purchase is a concept used to value an asset based on its expected:
a) Income stream
b) Appreciation rate
c) Replacement cost
d) Resale value
Answer: a) Income stream
A sinking fund is a fund set up to:
a) Invest in stocks and bonds
b) Purchase annuities
c) Pay off a debt or loan
d) Capitalize future income
Answer: c) Pay off a debt or loan
The redemption of capital refers to the:
a) Repayment of a loan or debt
b) Purchase of an annuity
c) Calculation of future income
d) Increase in the value of an investment
Answer: a) Repayment of a loan or debt
Reversionary value is the value of an asset at the:
a) Beginning of its useful life
b) End of its useful life
c) Time of capitalization
d) Time of redemption
Answer: b) End of its useful life
In an annuity, the regular payments are made at equal intervals of:
a) Time
b) Amount
c) Interest rate
d) Capitalization period
Answer: a) Time
What is the formula to calculate the future value of an annuity?
a) FV = PV × (1 + r)^n
b) FV = PV / (1 + r)^n
c) FV = PV × r^n
d) FV = PV / r^n
Answer: a) FV = PV × (1 + r)^n
The rate of capitalization is typically expressed as a:
a) Percentage
b) Dollar amount
c) Ratio
d) Time period
Answer: a) Percentage
Years purchase is a factor used to calculate the present value of an asset based on its expected:
a) Cost
b) Market value
c) Income stream
d) Appreciation rate
Answer: c) Income stream
A sinking fund is designed to accumulate funds to:
a) Purchase annuities
b) Pay off a debt or loan
c) Invest in stocks and bonds
d) Capitalize future income
Answer: b) Pay off a debt or loan
The redemption of capital refers to the:
a) Repayment of a loan or debt
b) Purchase of an annuity
c) Calculation of future income
d) Increase in the value of an investment
Answer: a) Repayment of a loan or debt
Reversionary value is the value of an asset at the end of its:
a) Useful life
b) Capitalization period
c) Amortization period
d) Annuity term
Answer: a) Useful life
Which of the following is an example of an annuity?
a) Winning the lottery
b) Selling a house
c) Receiving monthly rent payments
d) Buying stocks
Answer: c) Receiving monthly rent payments
The process of determining the present value of a future sum of money is known as:
a) Capitalization
b) Amortization
c) Sinking fund
d) Discounting
Answer: d) Discounting
What is the formula to calculate the present value of a future sum?
a) PV = FV × (1 + r)^n
b) PV = FV / (1 + r)^n
c) PV = FV × r^n
d) PV = FV / r^n
Answer: b) PV = FV / (1 + r)^n
The rate at which interest is compounded annually is called the:
a) Capitalization rate
b) Amortization rate
c) Sinking fund rate
d) Discount rate
Answer: a) Capitalization rate
Years purchase is a concept used to value an asset based on its expected:
a) Income stream
b) Appreciation rate
c) Replacement cost
d) Resale value
Answer: a) Income stream
A sinking fund is a fund set up to:
a) Invest in stocks and bonds
b) Purchase annuities
c) Pay off a debt or loan
d) Capitalize future income
Answer: c) Pay off a debt or loan
The redemption of capital refers to the:
a) Repayment of a loan or debt
b) Purchase of an annuity
c) Calculation of future income
d) Increase in the value of an investment
Answer: a) Repayment of a loan or debt
Reversionary value is the value of an asset at the:
a) Beginning of its useful life
b) End of its useful life
c) Time of capitalization
d) Time of redemption
Answer: b) End of its useful life
In an annuity, the regular payments are made at equal intervals of:
a) Time
b) Amount
c) Interest rate
d) Capitalization period
Answer: a) Time
What is the formula to calculate the future value of an annuity?
a) FV = PV × (1 + r)^n
b) FV = PV / (1 + r)^n
c) FV = PV × r^n
d) FV = PV / r^n
Answer: a) FV = PV × (1 + r)^n
The rate of capitalization is typically expressed as a:
a) Percentage
b) Dollar amount
c) Ratio
d) Time period
Answer: a) Percentage
Years purchase is a factor used to calculate the present value of an asset based on its expected:
a) Cost
b) Market value
c) Income stream
d) Appreciation rate
Answer: c) Income stream
A sinking fund is designed to accumulate funds to:
a) Purchase annuities
b) Pay off a debt or loan
c) Invest in stocks and bonds
d) Capitalize future income
Answer: b) Pay off a debt or loan
The redemption of capital refers to the:
a) Repayment of a loan or debt
b) Purchase of an annuity
c) Calculation of future income
d) Increase in the value of an investment
Answer: a) Repayment of a loan or debt
Reversionary value is the value of an asset at the end of its:
a) Useful life
b) Capitalization period
c) Amortization period
d) Annuity term
Answer: a) Useful life
Which of the following is an example of an annuity?
a) Winning the lottery
b) Selling a house
c) Receiving monthly rent payments
d) Buying stocks
Answer: c) Receiving monthly rent payments
The process of determining the present value of a future sum of money is known as:
a) Capitalization
b) Amortization
c) Sinking fund
d) Discounting
Answer: d) Discounting
What is the formula to calculate the present value of a future sum?
a) PV = FV × (1 + r)^n
b) PV = FV / (1 + r)^n
c) PV = FV × r^n
d) PV = FV / r^n
Answer: b) PV = FV / (1 + r)^n
The rate at which interest is compounded annually is called the:
a) Capitalization rate
b) Amortization rate
c) Sinking fund rate
d) Discount rate
Answer: a) Capitalization rate
Years purchase is a concept used to value an asset based on its expected:
a) Income stream
b) Appreciation rate
c) Replacement cost
d) Resale value
Answer: a) Income stream
A sinking fund is a fund set up to:
a) Invest in stocks and bonds
b) Purchase annuities
c) Pay off a debt or loan
d) Capitalize future income
Answer: c) Pay off a debt or loan
The redemption of capital refers to the:
a) Repayment of a loan or debt
b) Purchase of an annuity
c) Calculation of future income
d) Increase in the value of an investment
Answer: a) Repayment of a loan or debt
Reversionary value is the value of an asset at the:
a) Beginning of its useful life
b) End of its useful life
c) Time of capitalization
d) Time of redemption
Answer: b) End of its useful life
In an annuity, the regular payments are made at equal intervals of:
a) Time
b) Amount
c) Interest rate
d) Capitalization period
Answer: a) Time
What is the formula to calculate the future value of an annuity?
a) FV = PV × (1 + r)^n
b) FV = PV / (1 + r)^n
c) FV = PV × r^n
d) FV = PV / r^n
Answer: a) FV = PV × (1 + r)^n
