Aman Khedia Time Value of Money akclasses.

in

Time Value of Money

Past Exam Questions 4. Mr. X invests Rs. 90,500 in post office at

7.5% p.a. simple interest. While calculating
June-2012 the rate was wrongly taken as 5.7% p.a. The
1. The S.I. on a sum of money is 49 of the principal difference in amounts at maturity is Rs.
and the no. of years is equal to the rate of 9,774. Find the period for which the sum
interest per annum. Find the rate of interest was invested:
per annum? (a) 7 years (b) 5.8 years
(a) 5% (b) 20/3% (c) 6 years (d) 8 years
(c) 22/7% (d) 6% Answer:
Answer: (c) Principal (P) = Rs. 90,500
(b) Given Say Principal = P Wrong Rate (R1) = 5.7% p.a.
4 Correct Rate (R2) = 7.5% p.a.
∴ S.I.= P
9 T =?
No. of years (time) T = Rate of interest (R) diff in Amount = 9,774
PTR
∴ S.I. = R2 T R1 T
100 Diff in Amount =[P (1 + ) P (1 + )]
4 P×R×R 100 100
∴ P= R2T R1 T
9 100
400
9, 774 = P [1 + −1− ]
R2 = 100 100
9 7.5T 5.7T
20 9, 774 = 90,500 [ − ]
∴R= % 100 100
3
1.8T
9, 774 = 90,500 ×
2. Simple interest on Rs. 2,000 for 5 months at 100
9,774 × 1,000
16% p.a. is __________. T = =6
90,500 × 18
(a) Rs. 133.33 (b) Rs. 133.26
(c) Rs. 134.00 (d) Rs. 132.09
June-2013
Answer:
(a) Given: Principal = Rs. 2,000
5 5. The difference between compound and
Time = yrs. (i.e. 5 months)
12 simple interest on a certain sum of money for
Rate = 16% p.a. 2 years at 4% p.a. is Rs. 1. The sum (in Rs.) is:
P×T×R
∴ S.I = (a) 625 (b) 630
100
2,000×5×16 (c) 640 (d) .635
=
12×100 Answer:
S.I = Rs. 133.33
(a) Let principal(p)=100, R=4%, T=2 yrs.
PRT 100×4×2
S.I. = = = Rs. 8
December-2012 100 100
R T 4 2
C.I. = P [(1 + ) − 1] = 100 [(1 + ) −
100 100
3. How much investment is required to yield an
Annual income of Rs. 420 at 7% p.a. Simple 1]
interest. = 100[(1 + 0.04)2 − 1]
(a) Rs. 6,000 (b) Rs. 6,420 = 100 (1 +0.04)2- 1]
(c) Rs. 5,580 (d) Rs. 5,000 = 100 [(1.04)2 - 1]
Answer: = 100 × (1.04 + 1) (1.04 - 1)
(a) Given S.I = 420, T = 1 yrs., R = 7% p.a. = 100 × 2.04 × 0.04 = 8.16
Let Investment (P) = Rs. x difference b/w C.I. & S.I. = 8.16 - 8 = 0.16
S.I × 100 420 × 100
P= = = Rs. 6,000 If difference is Rs.0.16 then principal= 100
R×T 7×1
10,00
∴ Rs. 1 =
0.16
= Rs. 625
Aman Khedia Time Value of Money akclasses.in

6. A sum of money compounded annually 8. In what time will a sum of money double its y
becomes Rs. 1,140 in two years and Rs. 1,710 at 6.25% p.a. simple interest?
in three years.Find the rate of interest per (a) 5 years (b) 8 years
annum. (c) 12 years (d) 16 years
(a) 30% (b) 40%
(c) 50% (d) 60% Answer:
Answer: (d) Let Principal (P) =100, R = 6.25%p.a.
(c) Let principal be P and Rate is R % p.a. Amount (A) = 200 T = ?
Case -1 S.I. = A – P
R T = 200 - 100 = 100
A = P (1 + ) S.I.× 100 100 × 10000
100
T= = = 16 yrs
R 2 P×R 100 × 625
= P (1 + ) ……..… (1)
100 9. What principal will amount to Rs. 370 in 6
Case - 2 years at 8% p.a. at simple interest?
R T
A = P (1 + ) (a) Rs. 210 (b) Rs. 250
100
R 3 (c) Rs.310 (d) Rs. 350
1710 = P (1 + ) ……...… (2) Answer:
100
Divide by (2)/eq (1) (b) Given Amount (A) = Rs. 370, T = 6 yrs, R
R 3 = 8% p.a.
1710 p (1 + )
100
= R 2 Let P = Rs. x
1140 p (1 + )
100 PRT x×8×6 48x
39 R S.I.= = =
= (1 + ) 400 100 100
26 100 48x
3 R A = P + S.I = x +
-1= 100
2 100 148x
2R = 100 370 =
100
R = 50% 370×100
x= = Rs. 250
148

December-2013 10. The partners A and B together lent Rs. 3,903

at 4% per annum interest compounded
7. On what sum difference between compound annually. After a span of 7 years, A gets the
interest and simple interest for two years at same amount as B gets after 9 years. The
7% p.a. interest is Rs. 29.4 share of A in the sum of Rs. 3,903 would
(a) Rs. 5,000 (b) Rs. 5,500 have been:
(c) Rs. 6,000 (d) Rs. 6,500 (a) Rs. 1,875 (b) Rs. 2,280
Answer: (c) Rs. 2,028 (d) Rs. 2,820
(c) Let the sum (P) Rs. = x Given R = 7% p.a.,T Answer:
= 2yrs (c) Let Principal of A (P1) = Rs. x
PRT x7.2 14𝑥 Rate R1 = 4% p.a.
S.I. = = = = 0.14x
100 100 100 T1 =7 years
R T
C.I. = P [(1 + ) − 1]s Principal of B (P2) = Rs. (3,903 - x)
100
2 R2 = 4%
7
= x [(1 + ) − 1] T2 = 9 years
100
= x [(1.07)2 - 1] Given A1 = A2
R1 T1 R2 T2
C.I. = x [1.1449 - 1] P1 (1 + ) = P2 (1 + )
100 100
= x × 0.1449 4 7 4 9
= 0.1449x x (1 + ) = (3,903 − x) (1 + )
100 I00
difference b/w C.I & S.I. = Rs. 29.4 x (1.04)7 = (3,903 - x) (1.04)9
C.I - S.I. = 29.4 x (1.04)9
=
3,903−x (1.04)7
0.1449x - 0.14x = 29.4
x
0.0049x = 29.4 = (1.04)2
29.4
(3,903 − x)
x= = 6,000
0.0049
Aman Khedia Time Value of Money akclasses.in

x 60,000
= 1.0816 A=
1.59374
(3,903 − x)
A = 37,647
x = 1.0816 (3,903 - x)
x = 4,221.4848 - 1.0816x
December-2014
x + 1.0816x = 4,221.4848
2.0816x = 4,221.4848
x = 4.221.4848 13. The future value of an annuity of Rs. 1,000
2.0816 made annually for 5 years at the interest of
x = 2,028 14% compounded annually is:
The share of A = 2,028 (Given (1.14)5 = 1.92541)
(a) Rs. 5,610 (b) Rs. 6,610
June-2014 (c) Rs. 6,160 (d) Rs. 5,160
Answer:
(b) Annuity (A) = Rs. 1,000
11. If a sum triples in 15 years at simple rate of
n = 5, R =14%
interest,* the rate of interest per annum will R 4
be: i= = = 0.14
100 100
(a) 13.0% (b) 13.3% Future value
A
(c) 13.5% (d) 18.0% A (n, i) = [(1 + i)n - 1]
i
Answer: 1,000
= [(1 + 0.14)5 - 1]
(b) Let Principal P = P 0.14
1,000
Amount A = 3P = [(1.14)5 - 1]
0.14
T = 15 years =
1,000
× [1.92541 - 1]
0.14
S.I. = A – P 1,000
= 3P - P = × 0.92541 = Rs. 6,610
0.14
= 2P
R=
S.I.× 100
14. A sum of money invested of compound
P×T
2 P × 100 interest doubles itself in four years. It
=
P × 15 becomes 32 times of itself at the same rate
200
= of compound interest in
15
R=
40 (a) 12 years (b) 16 years
3
(c) 20 years (d) 24 years
= 13.3%
Answer:
12. How much amount is required to be (c) CASE → I Let Principal (P) =100, T = 4
invested every year as to accumulate Rs. years
6,00,000 at the end of 10 years, if interest is (A) =200 R = ?
compounded annually at 10% rate of R T
interest [Given: (1.1)10= 2.59374]. A = P (1 + )
100
4
(a) Rs. 37,467 (b) Rs. 37,476 200 = 100 (1 +
R
)
100
(c) Rs. 37,647 (d) Rs. 37,674 4
R
Answer: 200 = (1 + )
100
(c) Given A(n, i) = Rs. 6,00,000 R
(1 + ) = 21/4
Annual Installment (A) = ? 100
R 10 CASE → II Let P =100, A = 3,200
R = 10% p.a. i = = = 0.1 R
100 100
(1 + ) = 21/4, T=?
n = 10 100
R T
Future value A = P (1 + )
A 100
A(n, i) = [(1 + i)n - 1] R T
i 3.200 = 100 (1 + )
A 100
6,00,000 = [(1 + 0.1)10 - 1] T
0.1 3,200 R
6,00,000 × 0.1 = A [(1.1)10 - 1] = (1 + )
100 100
60,000 = A [2.59374 - 1] 32 = (21/4)T
T
60,000 = A × 1.59374 25 = 2 4
Aman Khedia Time Value of Money akclasses.in

T Case - 2
=5 =
4
P = 100, R = 12.5%
=T = 20 years
A = 300
15. A certain sum of money was invested at
S.I. =300 - 100 = 200
simple rate of interest for three years. If the S.I.× 100
same has been invested at a rate that was T=
P×R
2 200 × 100 8
seven percent higher, the interest amount =
100 × 12.5
would have been Rs. 882 more. The amount =2×8
of sum invested is: = 16 yrs.
(a) Rs. 12,600 (b) Rs. 6,800
(c) Rs. 4,200 (d) Rs. 2,800
17. A sum of Rs. 44,000 is divided into three
parts such that the corresponding interest
Answer:
earned after 2 years, 3 years and 6 years
(a) Let certain sum (P1) = P2 = P
may be equal. If the rates of simple interest
CASE → 1
are 6% p.a., 8% p.a. and 6% p.a. respectively,
Principal (P1) = P
then the smallest part of the sum will be:
(R1) = R%
P 1 R1 T 1 (a) Rs. 4,000 (b) Rs. 8,000
(S.I.)1 =
100 (c) Rs. 10,000 (d) Rs. 12,000
T1 = 3 yrs Answer:
PR3
= (b) Total Sum = Rs. 44,000.
100
CASE → 2 Let Ist part = Rs. x
Principal (P2) = P IInd part = Rs. y
P 2 R2 T 2 lllrdpart = Rs.z
(R2) = (R + 7)% (S.I.)2 =
100 Case -1 Principal (P1) = Rs. x
(T2) = 3 yrs =
Rate (R1) = 6% p.a.
P(R+7)3
100 (T1) = 2 yrs.
P 1 R1 T 1
Given, (S.I.)2 - (S.I.)1 = 882 (S.I.)1 =
P(R+7)3 PR3 100
- = 882 (S.I.)1 =
x×6×2
100 100
100
3PR + 21P − 3PR
= 882 (S.I.)1 =
12x
100
100
21P = 882 × 100 Case - 2 Principal (P2) = Rs. y
882 × 100
P= (R2) = 8% p.a.
21
P = 42 × 100 (T2) = 3 yrs.
P 2 R2 T 2 y×8×3
P = 4,200 (S.I.)2 = =
100 100
24y
(S.I.)2 =
June-2015 100
Case - 3 Principal (P3)= Rs. z
16. A sum of money doubles itself in 8 years at R3 = 6% p.a.
simple interest.
T3 = 6 yrs. .
The number of years it would triple itself is P 3 R3 T 3 z×6×6
(S.I.)3 = =
__________. 100 100
36z
(a) 20 years (b) 12 years (S.I.)3 =
100
(c) 16 years (d)None Given: (S.I.)1 = (S.I.)2 = (S.I.)3
Answer: 12x 24y 36z
(c) Case - 1 = =
100 100 100
Let P =100 A =200 or x = 2y = 3z = k (let)
S.I. = A – P x = k,2 y = k, 3z = k
= 200 – 100 y = k/2 z = k/3
= 100 k k k
x : y: z = : :
S.I.× 100 1 2 3
R= k k
P×T = 6k : 6× : 6×
100 × 100 2 3
= =6:3:2
100 × 8
R = 12.5%. 2
Smallest Sum = × 44,000
6+3+2
Aman Khedia Time Value of Money akclasses.in

2 S.I.×100 90×100
= × 44,000 = 8,000 P= = = Rs. 450
11 R×T 10×2
December-2015 Now
R T
C.I. = P [(1 + ) − 1]
100
18. Suppose your parent decides to open a PPF 2
10
(Public Provident Fund) account in a bank = 450 [(1 + ) − 1]
100
towards your name with Rs. 10,000 every
= 450 [(1 + 0.1)2 - 1]
year starting from today for next 15 years.
= 450 × [(1.1)2 - 1]
When you receive and get 8.5% per annum
= 450 × (1.21 - 1)
interest rate compounded annually. What is
= 450 × 0.21
the present value of this annuity? (Give
= 94.50
answer in Rs. without any fraction.)
(Given P (15,0.085) = 8.304236576)
June-2016
(a) 83,042 (b) 1,66,084
(c) 93,042 (d) 8,30,423
21. Mr. X bought an electronic item for Rs.
Answer:
1,000. What would be the future value of the
(c) Annual installment (A) = Rs. 10,000
same item after 2 years, if the value is
n =15 years
compounded semiannually at 22% per
R = 8.5% p.a.
8.5 annum?
i= = 0.085
100 (a) Rs. 1488.40 (b) Rs. 1518.07
Present value = A. P(n, i) + A (c) Rs. 2008.07 (d) Rs. 2200.00
=10,000.P (15, 0.085) + 10,000 Answer:
= 10,000 × 8.304236576 + 10,000 (b) Principal (P) = 1000
= 83042.36576 + 10,000 R=
22
% = 11%
2
= 93,042
T = 2 × 2 = 4 half yearly
19. In how many years will a sum of money R T
become four times at 12% p.a. simple Future value A = P(1 + )
100
interest? 11 4
= 1000(1 + )
(a) 18 years (b) 21 years 100

(c) 25 years (d) 28 years = 1000(1 + 0.11)4

Answer: = 1000 (1.11)4
(c) Let Principal P =100 = 1518.07
A = 400 22. If an amount is kept at simple interest, it
S.I.= A – P earns an interest of Rs. 600 in first two years
= 400 – 100 but when kept at compound interest it earns
= 300 an interest of Rs. 660 for the same period,
R - 12%, T=? then the rate of interest and principal
PRT amount respectively are:
S.I. =
100 (a) 20%, Rs. 1,200
S.I.× 100 300 × 100
T= = = 25 years (b) 10%, Rs. 1,200
PR 100 × 12
(c) 2Q%, Rs. 1,500
20. The simple interest for a certain sum for 2 (d) 10%, Rs. 1,500
years at 10% per annum is Rs. 90. The Answer:
corresponding compound interest is (In (c) For 2 years
Rs.): S.I. = 600 and C.I. = 660
PRT
(a) 99 (b) 95.60 S.I. =
100
(c) 94.50 (d) 108 PR × 2
600 =
Answer: 100
600 × 100
(c) Let Principal (P) = Rs. x PR =
2
T = 2 years , R = 10% p.a. 30000
PR = 30000 ⇒ P = ______(1)
R
S.I. = Rs.90
Aman Khedia Time Value of Money akclasses.in

R T T = 2 years R = 5%
C.I. = P [(1 + ) − 1] 2
100 R
2 C.I. - S.I = P ( )
30000 R 100
660 = [(1 + ) − 12 ] 5 2
R 100 30 = P ( )
100
30000 R R
660 = [(1 + + 1) (1 + 30 = P(0.05)2
R 100 100 30 = P (0.0025)
− 1)] P=
30
= Rs. 12,000
0.0025
30000 R R
660 = [(2 + )( )]
R 100 100 25. A person lends Rs. 6,000 for 4 years and Rs.
200 + R 1
660 = 30000 ( )⋅ 8,000 for 3 years at simple interest. If he
100 100
660 × 100 × 100 = 30000 (200 + R) gets Rs. 2,400 as total interest, the rate of
660 × 100 × 300 interest is:
200 + R =
30000 (a) 5% (b) 4%
200 + R = 220 (c) 6% (d) 7%
R = 20% Answer:
R = 20% in equation (1) (a) Given P1 Rs. 6,000 P2 = Rs. 8,000, Total
30000
P= = 1500 S.I. = 2,400
20
R1 = R% R2 = R%
December-2016 T1 = 4 years, T2 = 3years
Total Interest = (S.I)1 + (S.I)2
23. The sum invested at 4% per annum P1 R1 T1 P2 R 2 T2
2,400 = +
compounded Semiannually amounts to Rs. 100 100
6,000 × R × 4 8,000 × R × 3
7,803 at the end of one year, is: 2,400 = +
100 100
(a) Rs. 7,000 (b) Rs. 7,500 2,400 = 240R + 240R
(c) Rs. 7,225 (d) Rs. 8,000 2,400
Answer: 2,400 = 480R → R = = 5%
480
(b) Let, sum (Principal)
P = Rs. x T = 1 year June-2017
R = 4% p.a. C.I.
A = Rs. 7,803 26. The future value of an annuity of Rs. 1,500
Interest is compounded half yearly (Semi made annually for five years at interest rate
Annually) 10% compounded annually is (Given that
4
then R = % = 2% (1.1)5 = 1.61051):
2
T = 1 × 2 = 2 half yearly (a) Rs. 9517.56 (b) Rs. 9157.65
Amount after T years (c) Rs. 9715.56 (d) Rs. 9175.65
R T Answer:
A = P (1 + )
100 (b) Annual Installment (Annuity) A = Rs.
2 2
7,803 = x (1 + ) 1,500
100
7,803 = x (1.02)2 n=5
7,803 = x × 1.0404 R =10%
10
x=
7,803
= 7,500 i= = 0.10
100
1.0404 A
Sum = 7,500 Future Value A(n, i) = [(1 + i)n - 1]
i
1,500
24. A compound interest on a sum for 2 years is =
0.10
[(1 + 0.10)5 - 1]
Rs. 30 more than the simple interest at the 1,50,000
= [(1 + 0.10)5 - 1]
rate of 5% per annum then the sum is: 10

(a) Rs. 11,000 (b) Rs. 13,000 = 15,000 [(1.1)5 - 1]

(c) Rs. 12,000 (d) Rs. 15,000 = 15,000 × [1.61051 - 1]
Answer: = 15,000 × 0.61051
(c) Given C.I. - S.I. =30 = 9,157.65
Aman Khedia Time Value of Money akclasses.in

27. The difference between the Compound

interest and Simple interest at 10% per 28. How much amount is required to be
annum for 4 years on Rs. 10,000 is Rs. invested every year as to accumulate Rs.
_________. 7,96,870 at the end of 10 years, if interest
(a) 650 (b) 640 compounded annually at 10% given that
(c) 641 (d) 600 A(10, 0.1) = 15.9374?
Answer: (a) Rs. 40,000 (b) Rs. 4,50,000
(c) Principal (P) = 10,000, Rate (R) = 10%, (c) Rs. 48,000 (d) Rs. 50,000
T = 4 years For S. I Answer:
PRT 10,000 × 10 × 4 (d) Future Value A(n, i),= 7,96,870
S.I. = = = 4,000
100 100
n = 10, ’ R = 10%
For C.I 10
R T i= = 0.1
C.I = P [(1 + ) − 1] 100
100 Future Value
10 4 A
= 10,000 [(1 + ) − 1] = 10,000 [(1 - A(n, i) = (1 + i)n – 1]
100 i
A
1)4 - 1] 7,96,870 = [(1 +0.1)10 - 1]
0.1
= 10,000(1.4641 - 1) A
7,96,870= [(1 - 1)10 - 1]
= 10,000 × 0.4641 = 4,641 0.1

C.I - S.I = 4,641 - 4,000 = 641