Basics of Financial Mathematics Test 3

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Basics of Financial Mathematics Test 3

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Question 1
1 / -0

The principal is Rs. $$1000$$, so if you pay off Rs. $$300$$, the remaining Rs. $$700$$ left to repay is also called the

A
Interest

B
Rate

C
Principle

D
Amount

Solution

If Rs. $$300$$ of Rs. $$1000$$ principal is paid off, the remaining Rs. $$700$$ left to repay is the new Principal.
It is also called the principal.
Question 2
1 / -0

Choose the corrrect relation between simple and compound interest.

A
$$C.I > S.I.$$

B
$$C.I < S.I.$$

C
$$C.I=SI$$

D
Can't say

Solution

In simple interest, the principal amount is $$P$$ in compound interest the principal amount is $$P+ I$$ (Interest of the previous year)
Since the principal amount in CI is more, $$\cfrac { PRT }{ 100 } $$ i.e., interest will be more in C.I
Hence, $$CI>SI$$.
Question 3
1 / -0

What will you call the extra amount of money you got as profit, after investing a certain amount?

A
Interest

B
Principle

C
Amount

D
Rate

Solution

The extra mount of money got as profit after investing a certain amount of money is called as $$Interest.$$
Interest is the cost of using somebody else’s money. When you borrow money, you pay interest. When you lend money, you earn interest.
There are several different ways to calculate interest, and some methods are more beneficial for lenders. The decision to pay interest depends on what you get in return, and the decision to earn interest depends on the alternative options available for investing your money.
Question 4
1 / -0

Identify which amount is the original amount of money, the amount before any interest is applied?

A
Interest

B
Rate

C
Principle

D
Amount

Solution

$$\text{Principal}$$ amount is the original amount of money, the amount before any interest is applied.
Principal is a term that has several financial meanings. The most commonly used refers to the original sum of money borrowed in a loan, or put into an investment. Similar to the former, it can also refer to the face value of a bond.
The amount borrowed, or the part of the amount borrowed which remains unpaid (excluding interest). here also called principal amount.
Question 5
1 / -0

What sum of money will amount to Rs. $$1188$$ in three years at $$9$$% per annum compounded yearly?

A
$$817$$

B
$$1017$$

C
$$1,100$$

D
$$917$$

Solution

$$\Rightarrow$$ $$A=$$Rs.$$1188\,R=9\%$$ and $$T=3\,$$years.
$$\Rightarrow$$ $$A=P\times (1+\dfrac{R}{100})^T$$

$$\Rightarrow$$ $$1188=P\times (1+\dfrac{9}{100})^3$$

$$\Rightarrow$$ $$1188=P\times (\dfrac{109}{100})^3$$

$$\Rightarrow$$ $$P=\dfrac{1188}{(1.09)^3}=$$Rs.$$917$$
Question 6
1 / -0

Which of the following is true about Annuity Contingent ?

A
It is made till the happening of an event.

B
It is made for fixed number of intervals of time.

C
Loans for home comes under it

D
All of the above

Solution

$$\Rightarrow$$ True statement about Annuity contingent is $$It\,is\,made\,till\,the\,happening\,of\,an\,event.$$
$$\Rightarrow$$ An annuity arrangement in which the beneficiary does not begin receiving payments until a specified event occurs.
$$\Rightarrow$$ A contingent annuity may be set up to begin sending payments to a beneficiary upon the death of another individual who wishes to ensure financial stability for the beneficiary, or upon retirement or disablement of the beneficiary.
Question 7
1 / -0

Which of the following is not an example of annuity contingent ?

A
Daughter's Marriage Loan

B
Life Insurance Plans

C
Mortgage

D
All of the above

Solution

$$\Rightarrow$$ $$Mortgage$$ is not an example of annuity contingent.
$$\Rightarrow$$ Annuity contingent is an annuity arrangement in which the beneficiary does not begin receiving payments until a specified event occurs.
$$\Rightarrow$$ A contingent annuity may be set up to begin sending payments to a beneficiary upon the death of another individual who wishes to ensure financial stability for the beneficiary or upon retirement or disablement of the beneficiary.
$$\Rightarrow$$ Daughter's Marriage loan and Life insurance plans are examples of annuity contingent.
Question 8
1 / -0

What is true about Annuity Due ?

A
It is an annuity in which payments are made at the end of each payment period.

B
It is an annuity in which payments are made at the beginning of each payment period.

C
It is an annuity in which payments are made in the middle of each payment period.

D
None of the above

Solution

$$\Rightarrow$$ True statement about Annuity Due is,
$$-It\,is\,an\,annuity\,in\,which\,payments\,are\,made\,at\,the\,beginning\,of\,each\,payment\,period.$$
$$\Rightarrow$$ Annuity due is an annuity whose payment is to be made immediately at the beginning of each period.
$$\Rightarrow$$ A common example of an annuity due payment is rent, as the payment is often required upon the start of a new month as opposed to being collected after the benefit of rent has been received for an entire month.
$$\Rightarrow$$ All payments are in the same amount.
$$\Rightarrow$$ All payments are made at the same intervals of time
Question 9
1 / -0

Determine the principal when time $$= 2$$ years, interest $$=$$ Rs. $$ 1000$$; rate $$= 5\%$$ p.a.

A
Rs. $$10000$$

B
Rs. $$20000$$

C
Rs. $$30000$$

D
Rs. $$40000$$

Solution

Here, time $$=2$$ years, interest $$=$$ Rs. $$1000$$, rate $$=5\%$$ p.a.

We know $$S.I=\dfrac{P\times R\times T}{100}$$

$$\Rightarrow$$ $$1000=\dfrac{P\times 5\times 2}{100}$$

$$\Rightarrow$$ $$P=\dfrac{1000\times 100}{5\times 2}=$$ Rs. $$10,000$$

Therefore, principal is Rs. $$10,000$$.
Question 10
1 / -0

Jacky borrows Rs. $$2000$$ from the bank. The Principal of the loan is _____.

A
Rs. $$1000$$

B
Rs. $$2000$$

C
Rs. $$3000$$

D
Rs. $$4000$$

Solution

Jacky borrows Rs. $$2000$$ from the bank. The Principal of the loan is Rs. $$2000.$$
Principal is a term that has several financial meanings. The most commonly used refers to the original sum of money borrowed in a loan, or put into an investment. Similar to the former, it can also refer to the face value of a bond.
The amount borrowed, or the part of the amount borrowed which remains unpaid (excluding interest). here also called principal amount.

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Basics of Financial Mathematics Test 3

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Question 1

Interest

Rate

Principle

Amount

Solution

Question 2

$$C.I > S.I.$$

$$C.I < S.I.$$

$$C.I=SI$$

Can't say

Solution

Question 3

Interest

Principle

Amount

Rate

Solution

Question 4

Interest

Rate

Principle

Amount

Solution

Question 5

$$817$$

$$1017$$

$$1,100$$

$$917$$

Solution

Question 6

It is made till the happening of an event.

It is made for fixed number of intervals of time.

Loans for home comes under it

All of the above

Solution

Question 7

Daughter's Marriage Loan

Life Insurance Plans

Mortgage

All of the above

Solution

Question 8

It is an annuity in which payments are made at the end of each payment period.

It is an annuity in which payments are made at the beginning of each payment period.

It is an annuity in which payments are made in the middle of each payment period.

None of the above

Solution

Question 9

Rs. $$10000$$

Rs. $$20000$$

Rs. $$30000$$

Rs. $$40000$$

Solution

Question 10

Rs. $$1000$$

Rs. $$2000$$

Rs. $$3000$$

Rs. $$4000$$

Solution

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