89
Q:

What is the rate of interest p.c.p.a.?

I. An amount doubles itself in 5 years on simple interest.

II. Difference between the compound interest and the simple interest earned on a certain amount in 2 years is Rs. 400.

III. Simple interest earned per annum is Rs. 2000

A) I only B) II and III only
C) All I, II and III D) I only or II and III only

Answer:   D) I only or II and III only



Explanation:

I.P*R*5100=PR=20

 II.P1+R1002-P-P*R*2100=400=>pR2=4000000

 III.P*R*1100=2000=>PR=200000

 PR2PR=4000000200000R=20

 

Thus I only or (II and III) give answer.

 

 Correct answer is (D)

Subject: Compound Interest
Exam Prep: Bank Exams
Job Role: Bank PO
Q:

A five-year promissory note with a face value of $3500, bearing interest at 11%  compounded semiannually, was sold 21 months after its issue date to yield the buyer 10% compounded quarterly.What amount was paid for the note

A) 4336.93 B) 5336
C) 6336 D) 7336
 
Answer & Explanation Answer: A) 4336.93

Explanation:

i=j/m

Maturity value = PV(1 + i)^n

Term = 5 years - 21 months=  3.25 years

Price paid = FV(1+ i )^-n

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7 7606
Q:

$10,000 face value strip bond has 15 years remaining until maturity. If the prevailing market rate of return is 6.5% compounded semiannually, what is the fair market value of the strip bond?

A) 1710.29 B) 2710.29
C) 3710.29 D) 4710.29
 
Answer & Explanation Answer: C) 3710.29

Explanation:

i=j/m

n =m(Term) = 2(15.5)  =31

Fair market value  Present value of the face value

 =FV(1+  i)^-n

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4 4698
Q:

A $1000 face value Series S50 compound interest Canada Savings Bond (CSB) was presented to a credit union branch for redemption.What amount did the owner receive if the redemption was requested on:January 17, 2001?

A) 1206 B) 1306
C) 1406 D) 1506
 
Answer & Explanation Answer: B) 1306

Explanation:

I  = ptr

Therefore, the total amount the owner received on January 17, 2001 was

$1295.57 + $10.47 = $1306.04

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3 5225
Q:

A chartered bank offers a five-year Escalator Guaranteed Investment Certificate.In successive years it pays annual interest rates of 4%, 4.5%, 5%, 5.5%, and 6%, respectively, compounded at the end of each year. The bank also offers regular five-year GICs paying a fixed rate of 5% compounded annually. Calculate and compare the maturity values of $1000 invested in each type of GIC. (Note that 5% is the average of the five successive one-year rates paid on the Escalator GIC.)

A) 1276.28 B) 1234
C) 1278 D) 1256
 
Answer & Explanation Answer: A) 1276.28

Explanation:

FV = $1000(1.04)(1.045)(1.05)(1.055)(1.06) = $1276.14

 the maturity value of the regular GIC is

 

 FV = $ 1000 x 1.055=  $1276.28

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4 6400
Q:

What periodic payment will an investor receive from a $9000, four-year, monthly payment GIC earning a nominal rate of 5.25% compounded monthly?

A) 29.38 B) 39.38
C) 49.38 D) 59.38
 
Answer & Explanation Answer: B) 39.38

Explanation:

i=j/m

The monthly payment will be=PV*I

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0 4361
Q:

Two payments of $10,000 each must be made one year and four years from now. If money can earn 9% compounded monthly, what single payment two years from now would be equivalent to the two scheduled payments?

A) 17296 B) 13296
C) 19296 D) 15296
 
Answer & Explanation Answer: C) 19296

Explanation:

i=j/m

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1 4024
Q:

What amount must you invest now at 4% compounded monthly to accumulate $10,000 after 3 year

A) 8695 B) 7695
C) 3695 D) 4695
 
Answer & Explanation Answer: A) 8695

Explanation:

Given: j = 4%, m=  12, FV = $10,000, Term=  3.5 years
Then n  =m  *Term  12(3.5)  42

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0 3057
Q:

Kramer borrowed $4000 from George at an interest rate of 7% compounded semiannually. The loan is to be repaid by three payments. The first payment, $1000, is due two years after the date of the loan. The second and third payments are due three and five years, respectively, after the initial loan. Calculate the amounts of the second and third payments if the second payment is to be twice the size of the third payment.

A) 1389 B) 1359
C) 1379 D) 1339.33
 
Answer & Explanation Answer: D) 1339.33

Explanation:

Given:j=7% compounded semiannually making m=2 and i = j/m= 7%/2 = 3.5%
Let x represent the third payment. Then the second payment must be 2x.
PV1,PV2, andPV3 represent the present values of the first, second, and third payments.

Since the sum of the present values of all payments equals the original loan, then
PV1 + PV2  +PV3  =$4000 -------(1)

PV1   =FV/(1 + i)^n  =$1000/(1.035)^4=  $871.44

At first, we may be stumped as to how to proceed for
PV2 and PV3. Let’s think about the third payment of x dollars. We can compute the present value of just $1 from the x dollars

pv=1/(1.035)^10=0.7089188

PV2   =2x * 0.7089188 = 1.6270013x
PV3   =x * 0.7089188=0.7089188x
Now substitute these values into equation ➀ and solve for x.
$871.442 + 1.6270013x + 0.7089188x  =$4000

2.3359201x  =$3128.558

x=$1339.326
Kramer’s second payment will be 2($1339.326)  =$2678.65, and the third payment will be $1339.33

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0 4502