Mathematics of Finance Quiz – 2

The quiz about the Mathematics of Finance is used to prepare for CA, CIMA, ICMAP, and MBA exams. MCQs cover many Business-related fields (such as Business Administration, Commerce, and chartered accountancy-related Institutes) in which the subject of Business Mathematics is taught. Let us Start with the Mathematics of Finance Quiz.

The quiz is about Mathematics of Finance which covers the topics of simple interest, compound interest, annuities, future values of annuity, the present value of an annuity, discounted cash flows, cash inflow, cash out flow, present values, and net present value.

1. A man wants to sell his laptop. There are two offers, one at Rs 10000 cash and the other on the credit of Rs 11800 to be paid after one year. Money could be invested at 18% per annum compounded annually. Which is the better option?

 Rs 11800 after one year

 None of the above

 Rs 10000 in cash

 Both are equally good

2. What amount of money should be invested for 5 years to get a sum of Rs 1000000? If interest is compounded half-yearly at the rate of 8% per annum?

 Rs 606000

 Rs 675564

 Rs 714286

 Rs 680583

3. A bond increases from $\$3500$ to $\$4000$ over 3 years. Complete the following calculation of the effective annual rate of interest: (i) Three-year ratio=?, (ii) Annual ratio=?, and (iii) Effect annul rate=? percent (on dp)

 3-year ratio = 1.142857, annual ratio = 1.0476, EAR = 4.6%

 3-year ratio = 1.142857, annual ratio = 1.0455, EAR = 4.6%

 3-year ratio = 1.0, annual ratio = 0.4167, EAR = 4.6%

 3-year ratio = 1.25, annual ratio = 0.4167, EAR = 4.6%

4. Rs. 5000 will give Rs 500 as simple interest at the rate of 5% per annum after __________ years.

 5

 2

 3

 4

5. At what annual rate of compound interest will Rs 20000 grow to Rs 27210 after four years?

 7%

 10%

 8%

 9%

6. A man borrowed Rs 800 at 10% per annum simple interest and immediately lent the whole sum at the rate of 10% per annum compounded annually. What does he gain at the end of the 2nd year?

 8

 10

 6

 0

7. The net present value at a discount rate of 12% is Rs -2000 and at 11% it is Rs 2808. Which one of the following statements about the internal rate of return (IRR) is correct?

 The IRR must be 11%

 The IRR must lie between 11% and 12%

 The IRR must be below 11%

 The IRR must be 12%

8. A sum of Rs 10000 is invested in a saving account that pays interest at 10\% per annum compounded annually. If the amount is kept on deposit for 5 years, what will the compound amount equal to?

 5000

 16105

 15000

 6105

9. A building society adds interest monthly to accounts even though interest rates are expressed in annual terms. The current rate is stated as a 4.8 percent annum. If an investor deposits $\$2500$ on 1 January, calculate the value of the account on 31 August, giving your answer correct to the nearest Penny.

 3637.73

 2570.8

 2581.13

 3471.1

10. If the NPV is $\$928$ when the discount rate is 10 percent and $-\$628$ when it is 20 percent, calculate the internal rate of return to two dp.

 None of these

 15.96%

 5.96%

 15%

11. A company is planning capital investment for which the following year-end cash flows have been estimated

Use tables to calculate the net present value (NPV) of the project using tables if the company has a cost of capital of 15 percent.

 104

 100

 90

 110

12. A sum of money placed at a compound interest doubles itself in 5 years. It will amount to eight times in:

 20 years

 12 years

 15 years

 10 years

13. Mrs. Shahida invested her entire savings of Rs 15000 at a simple interest rate of 10%. How many years she would have to wait in order to double his amount?

 20 years

 10 years

 5 years

 8 years

14. Ali borrowed Rs 5000 from Akhter at simple interest. After 3 years, Akhter got Rs 300 more than what he had given to Ali. What was the rate of interest per annum?

 2%

 8%

 10%

 5%

15. The net present value (NPV) of a project is RS 25000 when the discount rate is 15%. Which one of the following statements is correct on the basis of the information given?

 If the discount rate is decreased to 14%, the NPV would decrease

 If the discount rate is increased to 16%, the NPV would increase

 The initial investment in this project is RS 25000

 The project is viable for investing at 15%

16. Complete the following calculation of net present value (NPV) at a 5% discount rate (working to the nearest whole number):

 

 

 

 

17. What is the simple interest rate of a principal amount of RS 1500 which grows to Rs 1725 after five years?

 7%

 9%

 5%

 3%

18. The amount of Rs 7500 at compound interest rate of 4\% per annum for 2 years would be _________

 Rs 8300

 Rs 8112

 Rs 8100

 Rs 8000

19. A man received RS 100000 from his friend at 10% per year on simple interest. How much will he pay after 5 years?

 Rs 100000

 RS 10000

 Rs 50000

 Rs 150000

20. If interest is compounded monthly, what total sum will have accumulated after five complete years?

 4184119.023

 40834.83

 2576.01

 41243.18

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Mathematics of Finance Quiz

• A company is planning capital investment for which the following year-end cash flows have been estimated Use tables to calculate the net present value (NPV) of the project using tables if the company has a cost of capital of 15 percent.
  
• If the NPV is $\$928$ when the discount rate is 10 percent and $-\$628$ when it is 20 percent, calculate the internal rate of return to two dp.
• The amount of Rs 7500 at a compound interest rate of 4\% per annum for 2 years would be ——–
• Mrs. Shahida invested her entire savings of Rs 15000 at a simple interest rate of 10%. How many years she would have to wait in order to double his amount?
• What amount of money should be invested for 5 years to get a sum of Rs 1000000? If interest is compounded half-yearly at the rate of 8% per annum?
• Rs. 5000 will give Rs 500 as simple interest at the rate of 5% per annum after ——– years.
• What is the simple interest rate of a principal amount of RS 1500 which grows to Rs 1725 after five years?
• A man received RS 100000 from his friend at 10% per year on simple interest. How much will he pay after 5 years?
• A sum of money placed at compound interest doubles itself in 5 years. It will amount to eight times in:
• Ali borrowed Rs 5000 from Akhter at simple interest. After 3 years, Akhter got Rs 300 more than what he had given to Ali. What was the rate of interest per annum?
• A sum of Rs 10000 is invested in a savings account that pays interest at 10\% per annum compounded annually. If the amount is kept on deposit for 5 years, what will the compound amount equal to?
• A man wants to sell his laptop. There are two offers, one at Rs 10000 cash and the other on the credit of Rs 11800 to be paid after one year. Money could be invested at 18% per annum compounded annually. Which is the better option?
• A man borrowed Rs 800 at 10% per annum simple interest and immediately lent the whole sum at the rate of 10% per annum compounded annually. What does he gain at the end of the 2nd year?
• The net present value at a discount rate of 12% is Rs -2000 and at 11% it is Rs 2808. Which one of the following statements about the internal rate of return (IRR) is correct?
• The net present value (NPV) of a project is RS 25000 when the discount rate is 15%. Which one of the following statements is correct based on the information given?
• At what annual rate of compound interest will Rs 20000 grow to Rs 27210 after four years?
• A building society adds interest monthly to accounts even though interest rates are expressed in annual terms. The current rate is stated as a 4.8 percent annum. If an investor deposits $\$2500$ on 1 January, calculate the value of the account on 31 August, giving your answer correct to the nearest Penny.
• A bond increases from $\$3500$ to $\$4000$ over 3 years. Complete the following calculation of the effective annual rate of interest: (i) Three-year ratio=?, (ii) Annual ratio=?, and (iii) Effect annul rate=? percent (on dp)
• Complete the following calculation of net present value (NPV) at a 5% discount rate (working to the nearest whole number):
  
• If interest is compounded monthly, what total sum will have accumulated after five complete years?

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