Time value of Money
- Which among the following is not the reason for time preference for money?
(a) Risk associated with future
(b) Preference for Present consumption
(c) Bank Interest Rate
(d) Reinvestment opportunities - Discounting techniques takes———–into account?
(a) Inflation
(b) Time value of money
(c) Discount received
(d) Profit - Real rates of return are typically less than nominal rates of return due to
(a) Inflation
(b) Capital gains
(c) Dividend payments
(d) Recession - Real rates of Interest on borrowings are typically less than nominal rates of interest due to
(a) Inflation
(b) Capital gains
(c) Dividend payments
(d) Recession - If there is no inflation during a period, then the Money Cash flow would be equal to:
(a) Present Value
(b) Real Cash flow
(c) Real Cash flow + Present Value
(d) Real Cash flow – Present Value - Real rate of return is equal to:
(a) Nominal Rate × Inflation Rate
(b) Nominal Rate ÷ Inflation Rate
(c) Nominal Rate – Inflation Rate
(d) Nominal Rate + Inflation Rate - Interest rate per year is 16 and compounding occurs every quarter than interest rate per compounding period is :
(a) 0.4
(b) 0.04
(c) 40
(d) 0.004 - A sum fetched a total simple interest of Rs. 4016.25 at the rate of 9 p.c.p.a. in 5 years, What is the sum?
(a) Rs. 4462.50
(b) Rs. 8032.50
(c) Rs. 8900
(d) Rs. 8925 - The difference between simple interest and compound on Rs. 1200 for one year at10% per annum reckoned half yearly is :
(a) Rs. 2.50
(b) Rs. 3
(c) Rs. 3.75
(d) Rs. 4 - The effective annual rate of interest corresponding to a nominal rate of 6% per annum payable half yearly is:
(a) 6.06%
(b) 6.07%
(c) 6.08%
(d) 6.09% - Find compound interest (in Rs.) on Rs.7,500 at 4% per annum for 2 years, compounded annually:
(a)A 312
(b) 512
(c) 412
(d) 612 - Accumulated series of deposits as future sum of money is classified as:
(a) Marginal Fund
(b) Sinking Fund
(c) Nominal Fund
(d) Annuity Fund - Monica deposits money in a bank paying 16% interest rate compounded quarterly. If she wants to have Rs.15,000 in her account after 5 years. How much should she deposit today?
(a) Rs.7777.77
(b) Rs.8040.50
(c) Rs.6500.00
(d) Rs.6,845.80 - Find the effective discount rate when nominal rate of discount is 10% compounded continuously.
(a) 9.00%
(b) 9.25%
(c) 10%
(d) 9.52% - A loan of Rs.20000 is to be repaid in certain equal annual installments of Rs.2470 each reckoning interest at 4% p.a. compound. Find the number of such installments.
(a) 11
(b) 10
(c) 15
(d) 9 - Vidya’s savings account has a balance of Rs.2,654.39. The interest rate is 3% compounded monthly. Find the original principal amount deposited two years ago?
(a) Rs.2500
(b) Rs.2550
(c) Rs.2475
(d) Rs.2600 - According to an investment proposal, an initial investment of Rs. 1,00,000 is expected to yield a uniform income stream of Rs. 10,000 per annum. If money is worth 8% per annum compounded continuously, what is the expected payback period, i.e, after what time, the initial investment will be recovered?
(a) 20 years
(b) 19 years
(c) 21 years
(d) 18 years - A person deposited Rs. 4000 in a bank at 6% compounded continuously. After 3 years, the rate of interest was increased to 7% and after 5 more years, the rate was further increased to 8%. The money was withdrawn at the end of 10 years. Find the amount
1. 7974.8
2. 8346.7
3. 9212.5
4. 8681.4 - Under compound interest the formula for A is given by __________.
1. A = Pnr/100.
2. A= P (1+i).
3. A= P (1+ni).
4. A= P (1+i)n