|
Mr. X is to invest Rs. 100000 by end of each year for 5 years @ 5% ROI. How much amount he will receive at the end of 5 years?
a. 522563
b. 525263
c. 552563
d. 555263
Ans - c
Solution:
P = 1000000
R = 5% p.a.
T = 5 Y
This question asks the FUTURE VALUE OF INVESTMENT AT THE END OF PERIOD, so, FVOA (Future Value of Ordinary Annuity) is applied.
The formula of FVOA =
------------------------------------
FVOA = (C ÷ R) x { (1 + R)^T - 1 }
------------------------------------
where
C = Cash flow per period
R = interest rate
T = number of payments
So,
FVOA = (100000÷0.05) * {{1+0.05}^5 – 1}
= 2000000 * (1.2763 - 1)
= 2000000 * 0.2763
= 552563
.............................................
A construction company plans to purchase a new earthmover for Rs. 350000 in 5 years. Determine the annual savings required to purchase the earthmover if the return on investment is 12%.
a. 50593
b. 55093
c. 50953
d. 59053
Ans - b
Solution:
Use FVOA formula to find C.
------------------------------------
FVOA = (C ÷ R) x { (1 + R)^T - 1 }
------------------------------------
where
C = Cash flow per period
R = interest rate
T = number of payments
Here FV is given.
350000 = (x ÷ 0.12) * {{1+0.12}^5 – 1}
350000 = (x ÷ 0.12) * (1.7623 - 1)
350000 = (x ÷ 0.12) * 0.7623
459112 = x ÷ 0.12
459112 * 0.12 = x
55093 = x
So, the annual savings required to purchase the earthmover is Rs. 55093
.............................................
Mr. X opened a recurring account with a bank to deposit Rs. 16000 by the end of each year @ 10% ROI. How much he would get at the end of 3rd year?
a. 52690
b. 52960
c. 56290
d. 56920
Ans - b
Solution:
Use FVOA formula to find FV. Here C is given.
The formula of FVOA =
------------------------------------
FVOA = (C ÷ R) x { (1 + R)^T - 1 }
------------------------------------
where
C = Cash flow per period
R = interest rate
T = number of payments
So,
FVOA = (16000÷0.1) * {{1+0.1}^3 – 1}
= 160000 * (1.331 - 1)
= 160000 * 0.331
= 52960
.............................................
If you wish an annuity to grow to Rs. 17000 over 5 years so that you can replace your car, what monthly deposit would be required if you could invest at the end of month @ 12% compounded monthly?
a. 208.16
b. 218.06
c. 268.16
d. 286.06
Ans - a
Solution:
Use FVOA formula to find C.
------------------------------------
FVOA = (C ÷ R) x { (1 + R)^T - 1 }
------------------------------------
where
C = Cash flow per period
R = interest rate
T = number of payments
Here FV is given.
This is monthly investment. So, rate of interest will be 12/12 = 1% = 0.01 and the period will be 5 x 12 = 60
17000 = (x ÷ 0.01) * {{1+0.01}^60 – 1}
17000 = (x ÷ 0.01) * (1.8167 - 1)
17000 = (x ÷ 0.01) * 0.8167
20816 = x ÷ 0.01
20816 * 0.01 = x
208.16 = x
So, the monthly deposit required to be invested is 208.16
.............................................
How much money will a student owe at graduation if she borrows Rs. 3000 per year @ 5% interest during each of her four years of school?
a. 12390
b. 12930
c. 13290
d. 13920
Ans - b
Solution:
Use FVOA formula to find FV. Here C is given.
The formula of FVOA =
------------------------------------
FVOA = (C ÷ R) x { (1 + R)^T - 1 }
------------------------------------
where
C = Cash flow per period
R = interest rate
T = number of payments
So,
FVOA = (3000÷0.05) * {{1+0.05}^4 – 1}
= 60000 * (1.2155 - 1)
= 60000 * 0.2155
= 12930
So, the student owe Rs. 12930 at graduation
.............................................
Mr. X wants to send his daughter to a management school after 5 years and will need onetime payment of charges amounting to Rs. 7 lac. At 12% ROI, how much he should invest annually?
a. 101086
b. 101186
c. 110186
d. 111086
Ans - c
Solution:
Use FVOA formula to find C.
------------------------------------
FVOA = (C ÷ R) x { (1 + R)^T - 1 }
------------------------------------
where
C = Cash flow per period
R = interest rate
T = number of payments
Here FV is given.
700000 = (x ÷ 0.12) * {{1+0.12}^5 – 1}
700000 = (x ÷ 0.12) * (1.7623 - 1)
700000 = (x ÷ 0.12) * 0.7623
918223 = x ÷ 0.12
918223 * 0.12 = x
110186 = x
So, he should invest Rs. 110186 annually.
……………………………………………………………………………………………………………………………………………
|
