CMAT Business Mathematics 1 — Questions and Answers
Question 1: What is the present value of $1,210 received 2 years from now at a 10% discount rate?
- $900
- $1,000 (Correct answer)
- $1,100
- $1,050
Correct answer: $1,000
PV = 1210 / (1.10)² = 1210 / 1.21 = $1,000.
Question 2: A product costs $80 to produce and is sold for $100. What is the profit margin?
- 20% (Correct answer)
- 25%
- 80%
- 125%
Correct answer: 20%
Profit margin = (100 − 80) / 100 × 100 = 20/100 × 100 = 20%.
Question 3: If a stock was bought at $50 and sold at $65, what is the return on investment?
- 25%
- 28%
- 30% (Correct answer)
- 33%
Correct answer: 30%
ROI = (65 − 50) / 50 × 100 = 15/50 × 100 = 30%.
Question 4: A company has fixed costs of $50,000, variable cost per unit of $10, and sells at $20. What is the break-even quantity?
- 2,500
- 5,000 (Correct answer)
- 7,500
- 10,000
Correct answer: 5,000
Break-even quantity = Fixed Costs / (Selling Price − Variable Cost) = 50,000 / (20 − 10) = 5,000 units.
Question 5: What is the effective annual rate (EAR) for a 12% nominal rate compounded monthly?
- 12%
- 12.36%
- 12.68% (Correct answer)
- 13%
Correct answer: 12.68%
EAR = (1 + 0.12/12)^12 − 1 = (1.01)^12 − 1 ≈ 12.68%.
Question 6: A company's current ratio is 2.5 and current liabilities are $40,000. What are the current assets?
- $60,000
- $80,000
- $100,000 (Correct answer)
- $120,000
Correct answer: $100,000
Current Assets = Current Ratio × Current Liabilities = 2.5 × 40,000 = $100,000.
CMAT Business Mathematics 1
What is the present value of $1,210 received 2 years from now at a 10% discount rate?