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Dfi 201: Personal Finance Question Paper

Dfi 201: Personal Finance

Course:Personal Finance

Institution: University Of Nairobi question papers

Exam Year:2014

UNIVERSITY OF NAIROBI
SECOND YEAR EXAMINATIONS FOR THE DEGREE OF BACHELOR OF COMMERCE

DFI 201: PERSONAL FINANCE
DATE: SEPTEMBER 3, 2014 TIME: 9.00 A.M.- 11.00 A.M.

INSTRUCTIONS:
Attempt ALL questions showing any workings required.

Question One

1. Assume that you will need $100,000 four years from now. Your bank compounds interest at an 8% annual rate.

a) How much must you deposit one year form now to have a balance of $100,000.

b) If you want to make equal payments at years 1 through 4, to accumulate $100,000 how large must each of the four payments be?

c) If your father were to offer to make the payments calculated in part b or to give you a lumpsum of $75,000 one year from now, which would
you choose?

d) If you have only $75,000 one yeay from now, what interest rate compounded annually would you have to earn the necessary $100,000 four
years form now?

e) Suppose you can deposit only $18,629 each year at years 1 through 4, but you still need $100,000 at year 4. What interest rate with annual
compounding must you seek out to achieve your goal?

f) To help you reach your $100,000 goal, your father offers to give you $40,000 one year from now. You will get a part-time job and make 6 additional
payments of equal amount each 6 months thereafter. If all of this money is deposited in a bank which pays 8% compounded semi annually, how large
must each of the 6 payments be?

g) What is the effective annual rate being paid by the bank in part f?
2. What factors might affect your current financial condition? (21 marks)

Question Two

a) State nine examples of long term goals you may aspire to achieve. (9 marks)

b) What are the qualities of useful goals? (6 marks)

c) What economic indicators influence financial decisions and in what ways? (10 marks)

Question Three

a) What are the main benefits and drawbacks of renting a place of residence? (8 marks)

b) Explain why you should or should not own a home. (7 marks)

c) Clearly distinguish between fixed-rate and adjustable-rate mortgages. (10 marks)

Question Four

a) Discuss the types of medical expenses covered by health insurance. (10 marks)

b) What are the policy provisions of medical expense plans? (15 marks)

Dfi 201: Personal Finance Question Paper

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