Prof.

G B Joshi -: 16 :- Time value of Money

SAMPLE MCQS
1. How much interest will be earned on Rs. 2000 at 6% simple interest for 2 years?
(a) Rs. 200 (b) Rs. 220 (c) Rs. 240 (d) Rs. 260

2. Sania deposited Rs. 50000 in a bank for two years with the mple interest rate of 5.5% p.a. How much interest
would she earned?
(a) Rs. 5500 (b) Rs. 5000 (c) Rs. 4500 (d) Rs.4000

3. In the above example what will be the final value of investment?

(a) Rs. 44500 (b) Rs. 55500 (c) Rs. 45400 (d) Rs. 54400

4. Sachin deposited Rs. 100000 in his bank for 2 years at simple interest rate of 6%. How much interest would he
earn? How much would be the final value of deposit?
(a) Rs. 111000 (b) Rs.121000 (c) Rs. 112000 (d) Rs.211000

5. Find the rate of the interest if the amount owned after 6 months is Rs. 1050, borrowed amount being Rs. 1000
(a) 8% (b) 9% (c) 10% (d) 11%

6. Rahul invested Rs.70000 in a bank at the rate of 6.5% p.a. simple interest rate. he received Rs. 85925 after the
end of term. Find out the period for which sum was invested by Rahul.
(a) 2.5 years (b) 1.5 years (c) 4.5 years (d) 3.5 years

7. Kapil deposited some amount in a bank for 7.5 years at the rate of 6%p.a. simple interest. Kapil received Rs.
101500 at the end of the term. Compute initial deposit of Kapil.
(a) Rs. 60000 (b) Rs. 70000 (c) Rs. 80000 (d) Rs. 90000

8. A sum of Rs. 46875 was lent out at simple interest and at the end of 1 year 8 months the total amount was Rs.
50000. Find the rate of interest percent per annum.
(a) 4% (b) 5% (c) 6% (d) 7%

9. What sum of money will produce Rs. 28600 as an interest in 3 years and 3 months at 2.5% p.a. simple interest?
(a) Rs. 352000 (b) Rs. 523000 (c) Rs. 325000 (d) None

10. In what time will Rs. 85000 amount to Rs. 157675 at 4.5% simple interest p.a.?
(a) 19 (b) 21 (c) 20 (d) 18

11. Saina deposited Rs. 100000 in a nationalized bank for three years. If the rate of interest is 7% p.a., calculate the
interest that bank has to pay to Saina after three years if interest is compounded annually. Also calculate the
amount at the end of the third year.
(a) Rs. 122504.30 (b) Rs. 134500.06 (c) 142400. 70 (d) None

12. Rs 2000 is invested at annual rate of interest of 10%. What is the amount after two years if compounding is
done
(a) Annually (b) Semi - annually (c) Quarterly (d) Monthly

(a) 2420, 2431, 2436.80, 2440.58 (b) 2340, 2612, 2463.70, 2553
(c) 2543, 2435, 2673.67, 2657.57 (d) None

13. Determine the compound amount and compound interest on Rs. 1000 at 6% compounded semi-annually for 6
years. Given that for i = 3% and n = 12
(a) Rs. 425.76 (b) Rs. 435.65 (c) 254.65 (d) None

14. Compute the compound interest on Rs. 4000 for 1.5 years at 10% per annum compounded half yearly.
(a) Rs. 630.50 (b) Rs. 646.73 (c) Rs. 564.44 (d) None

15. On what sum will the compound interest at 5% per annum for two year compounded annually be Rs.1640?
(a) Rs.16000 (b) Rs.15000 (c) Rs. 14000 (d) Rs. 13000

16. What annual rate of interest compounded annually doubles an investment in 7 years? Given that
(a) 10.41% (b) 9.63% (c) 12.76% (d) 10.56%

EKATVAM: Commerce Ke Liye Hamesha Pratham Foundation Maths/Stats/LR.

Prof. G B Joshi -: 17 :- Time value of Money

17. In what time will Rs.8000 amount to Rs.8820 at 10% per annum interest compounded half yearly?
(a) 5 HY (b) 3 HY (c) 4 HY (d) 2 HY

18. Find the rate percent per annum if Rs. 200000 amount to Rs. 231525 in 1.5 year interest being compounded
half-yearly.
(a) 12% (b) 13% (c) 10% (d) 15%

19. A certain sum invested at 4% per annum compounded semi-annually amounts to Rs.78030 at the end of one
year. Find the sum.
(a) Rs. 75000 (b) Rs.70000 (c) Rs. 85000 (d) Rs. 80000

20. Rs.16000 invested at 10% p.a. compounded semi-annually amount to Rs. 18522. Find the time period of
investment.
(a) 1.5 years (b) 1 year (c) 2 years (d) 2.5 years

> Answer Q. Nos. 21 to 23 using following information -

A person opened an account on April, 2001 with a deposit Rs.800. The account paid 6% interest compounded
quarterly. On October 1 2001 he closed the account and added enough additional money to invest in a month
time - deposit for Rs. 1000, earning 6% compounded monthly.

21. How much additional amount did the person invest on October 1?
(a) Rs. 175 (b) Rs.134.56 (c) Rs. 175.82 (d) None

22. What was the maturity value of his time deposit on April 1 2002?
(a) Rs. 1030.38 (b) Rs. 1583. 54 (c) Rs. 1045. 80 (d) None

23. How much total interest was earned?

(a) Rs. 45.87 (b) Rs. 54.56 (c) Rs.64.95 (d) None

24. Rs. 5000 is invested in a Term Deposit Scheme that fetches interest 6% per annum compounded quarterly.
What will be the interest after one year? What is the effective rate of interest?
(a) Rs. 304.53, 6.25% (b) Rs. 306.82, 6.13% (c) Rs.635.86, 6.53% (d) None

25. Find the amount of compound interest and effective rate of interest if an amount of Rs. 20000 is deposited in
bank for one year at the rate 8% per annum compounded semi annually.
(a) Rs. 1535, 6.57 (b) Rs. 5342, 2.34 (c) Rs. 1632, 8.16% (d) None

26. Which is a better investment 3% per year compounded monthly or 3.2% per year simple interest? Given that
(a) 3.2% (b) 3% (c) both are same (d) can’t say

27. You invest Rs. 3000 in a two year investment that pays you 12% C.I. per annum. Calculate the future value of
the investment.
(a) Rs. 6453 (b) Rs. 3520.75 (c) Rs. 3763.20 (d) None

28. Find the future value of annuity of Rs. 500 made annually for 7 years at interest rate 14% compounded
annually. Given that
(a) Rs. 5632.75 (b) Rs. 7453.80 (c) Rs.6535.72 (d) Rs. 5365.25

29. Rs. 200 invested at the end of each month in an account paying interest 6% per compounded monthly. What is
the future value of the annuity after 10th payment? Given that
(a) Rs. 2044 (b) Rs. 3040 (c) Rs. 6320 (d) Rs.4360

30. Z invests Rs. 10000 every year starting from today for next 10 years. Suppose interest rate is 8% per annum
compounded annually. Calculate future value of the annuity. Given that
(a) Rs. 156454.875 (b) Rs. 163472.54 (c) Rs.756329.64 (d) None

31. What is the present value of Re.1 to be received after 2 years compounded annually at 10% interest value?
(a) Re.0.83 (b) Re. 0.64 (c) Re. 0.94 (d) None

32. Find the present value of Rs. 10000 to be required after 5 years if the rate of compound interest rate be 9%.
Given that
(a) Rs. 6462.75 (b) Rs. 6453.95 (c) Rs. 6499.42 (d) None

EKATVAM: Commerce Ke Liye Hamesha Pratham Foundation Maths/Stats/LR.

Prof. G B Joshi -: 18 :- Time value of Money

33. S borrows Rs. 500000 to buy a house. If he pays equal installments for 20 years and 10% interest on
outstanding balance what will be the equal annual installment?
(a) Rs. 58729.84 (b) Rs. 64352.86 (c) Rs.53527.75 (d) None

34. Rs. 5000 is paid every year for ten years to pay off a loan. What is the loan amount if interest rate be 14% per
annum compounded annually?
(a) Rs. 26080.55 (b) Rs. 53200.75 (c) Rs. 54362.05 (d) None

35. Y bought a TV costing Rs. 13000 by making a down payment of Rs. 3000 and agreeing to make equal annual
payment for four years. How much would be each payment if the interest on unpaid amount be 14%
compounded annually?
(a) Rs. 3458.94 (b) Rs.6453.02 (c) Rs. 3432.05 (d) None

36. Suppose your mom decides to gift you Rs.10000 every year starting from today for the next five years. You
deposit this amount in a bank as and when you receive and get 10% per annum interest rate compounded
annually. What is the present value of this annuity?
(a) Rs. 41698.70 (b) Rs. 63529.75 (c) Rs.64352.05 (d) None

37. How much amount is required to be invested every year so as to accumulate Rs.300000 at the end of 10 years
if interest is compounded annually at 10%?
(a) Rs.18823.62 (b) Rs. 14537.848 (c) Rs. 17463.95 (d) none

38. ABC ltd. wants to lease out an asset costing Rs.360000 for a five year period. It has fixed a rental of Rs.105000
per annum payable annually starting from the end of first year. Suppose rate interest is 14% per annum.
Compounded annually on which money can be invested by the company. Is this agreement favorable to the
company.
(a) Rs. 368583.04 (b) Rs. 360473.40 (c) Rs. 37747.05 (d) None

39. A company is considering proposal of purchasing a machine either by making full payment of Rs.4000 or by
leasing it for four years at an annual rate of Rs. 1250. Which course of action is preferable if the company can
borrow money at 14% compounded annually?
(a) Rs.3642.11 (b) Rs. 3646.69 (c) Rs.3869.38 (d) None

40. A machine can be purchased for Rs.50000. Machine will contribute Rs. 12000 per year for the next five years.
Assume borrowing cost is 10% per annum compounded annually. Determine whether machine should be
purchased or not.
(a) Rs. 45489.48 (b) Rs.4928.74 (c) Rs. 4959.38 (d) None

41. A machine with useful life of seven years costs Rs. 10000 while another machine with useful life of five years
costs Rs.8000. The first machine saves labour expenses of Rs. 1900 annually and second one saves labour
expenses of Rs. 2200 annually. Determine the preferred course of action. Assume cost of borrowing as 10%
compounded per annum.
(a) Rs.8636.85 (b) Rs. 6382.03 (c) Rs. 6452.85 (d) Rs. 8339.74

42. An investor intends purchasing a three year RS. 1000 per value bond having nominal interest rate 10%. At what
price the bond may be purchased now if it matures at par and the investor requires a rate of return of 14%?
(a) Rs. 907.125 (b) Rs.738.62 (c) Rs. 758.47 (d) None

43. Veena deposited Rs.7200 in a finance company which pays15% simple interest per year. Find the interest and
the amount she expected to get after 4 years and six month.
(a) Rs.12060 (b) Rs.63020 (b) Rs.16200 (d) None

44. William deposited Rs. 520 in a bank. The bank pays simple interest 8% per annum. Find the interest and
amount to be received by William after two years.
(a) Rs.1920 (b) Rs. 1740 (c) Rs. 1840 (d) None

45. Find the interest on Rs. 1200 at 6% per annum for 146 days.
(a) Rs.28.80 (b) Rs.83.90 (c) Rs.35.60 (d) Rs. None

46. Find the simple interest and amount of Rs. 365 from 1st January 2005 to 25th October 2005 at 5% per annum.
(a) (b) (c) (d)

47. What principle amount to Rs.17200 in 6 years at 12% p.a.?

(a) Rs. 12000 (b) Rs.10000 (c) Rs. 15000 (d) None
EKATVAM: Commerce Ke Liye Hamesha Pratham Foundation Maths/Stats/LR.
Prof. G B Joshi -: 19 :- Time value of Money

48. A sum fetched a total simple interest of Rs. 4016.25 at the rate of 9% p.a. in 5 years. What is the sum?
(a) Rs. 8925 (b) Rs. 6473 (c) Rs. 2283 (d) None

49. Anshul invested Rs. 3000 at simple interest for 3 years and received Rs. 4170. Find the rate of interest.
(a) 12% (b) 10% (c) 15% (d) 13%

50. If the simple interest on a certain sum of money for 2 years is one-fifth of the sum. Find the rate of interest.
(a) 5% (b) 7% (c) 10% (d) 12%

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CORRECT ANSWERS

(1) c (2) a (3) b (4) c (5) c (6) d (7) b (8) a (9) a (10) a

(11) a (12) a (13) a (14) a (15) a (16) a (17) a (18) c (19) a (20) a

(21) c (22) a (23) b (24) b (25) b (26) a (27) c (28) d (29) a (30) a

(31) a (32) c (33) a (34) a (35) c (36) a (37) a (38) b (39) a (40) a

(41) d (42) a (43) a (44) d (45) a (46) b (47) b (48) d (49) d (50) c

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EKATVAM: Commerce Ke Liye Hamesha Pratham Foundation Maths/Stats/LR.