Free Financial Mathematics: Interest, Annuities and Discounting MCQs with Answers
30 Financial Mathematics: Interest, Annuities and Discounting MCQs from Quantitative Methods, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
Financial mathematics covers simple and compound interest, principal, rate, time, accumulated value and present value. It also includes annuities, regular payments, sinking funds, loan repayments and discounting, with a distinction between ordinary annuities and annuities due and between trade discount and mathematical discount.
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30 questions · page 2 of 2
- A. Rs. 13,310.00
- B. Rs. 13,500.00
- C. Rs. 13,400.96
- D. Rs. 13,600.00
Explanation: The semiannual rate is 5% and there are six compounding periods. Thus, the value is Rs. 10,000(1.05)^6 = Rs. 13,400.96.
Correct answer: Rs. 13,400.96- A. 3.00%
- B. 3.33%
- C. 4.00%
- D. 4.33%
Explanation: The simple interest is Rs. 1,600. Since I = PRT, the rate is 1,600 divided by Rs. 12,000 multiplied by 4, which equals 3.33% per annum.
Correct answer: 3.33%- A. Rs. 900.00
- B. Rs. 909.09
- C. Rs. 1,000.00
- D. Rs. 1,111.11
Explanation: The present value is 10,000 divided by 1.10, or Rs. 9,090.91. True discount is the maturity value minus present value, giving Rs. 909.09.
Correct answer: Rs. 909.09- A. Rs. 25,000
- B. Rs. 50,000
- C. Rs. 40,000
- D. Rs. 66,667
Explanation: For a growing perpetuity, present value equals the next payment divided by the discount rate minus the growth rate.
Correct answer: Rs. 40,000- A. Rs. 30,000
- B. Rs. 40,000
- C. Rs. 36,000
- D. Rs. 35,000
Explanation: Interest for the first year is Rs. 5,000, so the balance before payment is Rs. 55,000. After paying Rs.
Correct answer: Rs. 35,000- A. 9.00%
- B. 9.09%
- C. 10.00%
- D. 11.11%
Explanation: The equivalent discount rate is d = i/(1+i). Hence, d = 0.10/1.10 = 0.0909, or 9.09%.
Correct answer: 9.09%- A. Rs. 500.00
- B. Rs. 413.22
- C. Rs. 909.09
- D. Rs. 1,000.00
Explanation: The present value of the returns is 6,000/1.10 + 6,000/(1.10)^2 = Rs. 10,413.22. Subtracting the initial cost gives an NPV of Rs. 413.22.
Correct answer: Rs. 413.22- A. Rs. 2,800.00
- B. Rs. 3,600.00
- C. Rs. 3,200.00
- D. Rs. 2,952.67
Explanation: Each payment is discounted according to its payment date: 1,000/1.10 + 1,200/(1.10)^2 + 1,400/(1.10)^3. The sum is approximately Rs.
Correct answer: Rs. 2,952.67- A. 8%
- B. 9%
- C. 10%
- D. 11%
Explanation: The growth factor over two years is 12,100/10,000 = 1.21. Since 1.21 is equal to 1.10 squared, the annual compound rate is 10%.
Correct answer: 10%- A. Rs. 965.29
- B. Rs. 950.00
- C. Rs. 980.00
- D. Rs. 1,000.00
Explanation: The bond price is the present value of its Rs. 80 coupon in year 1 and Rs. 1,080 in year 2. Thus, price = 80/1.10 + 1,080/(1.10)^2 = Rs.
Correct answer: Rs. 965.29