Basics of Financial Mathematics Test 33

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Basics of Financial Mathematics Test 33

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Weekly Quiz Competition

Question 1
1 / -0

Which of the following asset is NOT depreciated?

A
Factory Buildings

B
Office Equipment

C
Plant & Machinery

D
Land

Solution

Land is not depreciated because land is assumed to have an unlimited useful life. Other long-lived assets such as land improvements, buildings, furnishings, equipment, etc. have limited useful lives. Therefore, the costs of those assets must be allocated to those limited accounting periods.
Question 2
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Seema invested an amount of Rs. $$16,000$$/- for two years at C.I. and received an amount of Rs. $$17640$$ on maturity. What is the rate of interest?

A
$$8\%$$

B
$$5\%$$

C
$$7\%$$

D
$$6\%$$

Solution

$$P=16000 \space ,A=176400 \space , T=2years$$
$$Let \space rate \space be \space R\%$$
$$A=P(1+\frac{R}{100})^T$$
$$17640=16000(1+\frac{R}{100})^2$$
$$\frac{17640}{16000}=(1+\frac{R}{100})^2$$
$$=>(\frac{42}{40})^2=(1+\frac{R}{100})^2$$
$$=>\frac{42}{40}=1+\frac{R}{100}$$
$$=>\frac{R}{100}=\frac{21}{20}-1$$
$$=\frac{1}{20}$$
$$=>R=\frac{100}{20}=5\%$$
$$Hence, \space Rate\% =5\% pa$$
Question 3
1 / -0

Depreciation is __________ of an asset.

A
Valuation

B
Allocation

C
Sale value

D
All of the above

Solution

The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the asset, is termed as Depreciation. Depreciation is any method of allocating such net cost to those periods in which the organization is expected to benefit from the use of the asset.
Thus, the correct option is B.
Question 4
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Depreciation is based on _________________.

A
Economic life of asset

B
Declared life of asset by supplier

C
Normal life of asset

D
None of these

Solution

Economic Life and Depreciation Depreciation refers to the rate at which an asset deteriorates over time. The depreciation rate is used to estimate the effects of aging, daily use, and wear and tear on the asset. When related to technology, depreciation can also include the risk of obsolescence.
Question 5
1 / -0

A decrease in value of fixed asset due to age, wear and tear ___________.

A
Appreciation

B
Written down value

C
Depreciation

D
Accumulated depreciation
Solution
Depreciation is a non-cash expense that reduces the value of an asset over time. Assets depreciate for below mentioned reasons:
- Wear and tear
- Obsolescence
- Keeping idle for prolonged
- Depletion
Question 6
1 / -0

The economic factors causing depreciation is/are:

A
Time factor

B
Obsolescence and inadequacy

C
Wear and tear

D
Money valuation
Solution
There are four cause due to which depreciation takes place:
Physical Deterioration
Economic Factors
Time Factors
Depletion
Economic factors arises due to obsolescence and inadequacy. Obsolescence means the process of becoming obsolete and out of date. New model and new technology may make the asset obsolete even though it is in good physical condition. Inadequacy refers to the stoppage of asset’s usage because of growth and changes in the size of the firm

Hence, Option (B) is the correct answer.
Question 7
1 / -0

Process of becoming out of date or obsolete is termed as_____________.

A
Physical deterioration

B
Depletion

C
Obsolescence

D
Amortization

Solution

The word "obsolete" refers to assets of different kinds, and the term, in general, has several meanings. "Obsolete" as an adjective can refer to something that is: No longer used, like a buggy whip. Out of date or old-fashioned, like a pair of bell-bottomed trousers from the 1970s.
Question 8
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Raviraj invested an amount of Rs. $$10,000$$/- at C.I. of $$10\%$$ p.a. for a period of $$3$$ years. How much amount will Raviraj get after $$3$$ years?

A
$$Rs.13,310$$

B
$$Rs.12,550$$

C
$$Rs.12,000$$

D
$$Rs.13,500$$

Solution

Principal, $$P=Rs.10,000$$
Rate of interest $$=10\%$$
Time $$=3$$ years
So, $$n=3$$

$$A=P(1+\cfrac{r}{100})^n$$
$$A=Rs.\ 10,000(1+\cfrac{10}{100})^3=Rs.13310$$
Amount$$=Rs.13,310$$
Question 9
1 / -0

The difference in compound interest and simple interest for one year for Rs. $$1,000$$ at $$10\%$$ p.a. is?

A
$$10$$

B
$$5$$

C
$$0$$

D
None of the above

Solution

$$SI = \cfrac{1000 \times 10 \times 1}{100} = ₹100$$
Compound interest for the first year $$= \cfrac{1000 \times 10 \times 1}{100} = ₹100$$
$$CI - SI =$$ $$ 100-100 = 0$$
Question 10
1 / -0

If the interest on a certain sum for first year at $$5\%$$ p.a. compounded is Rs. $$25$$ then, the total interest at the end of second year will be.

A
$$51.25$$

B
$$50$$

C
$$26.25$$

D
None of the above

Solution

$$I=25$$
$$R=5%$$
$$SI=\cfrac{P\times R \times T }{100}$$
$$ 25 = \cfrac{P \times 5\times 1}{100}$$
$$ P= \cfrac{25 \times 100}{5} = ₹500$$
Amount after first year $$= 500 + 25 = 525$$
Interest for second year $$= \cfrac{525 \times 5\times 1}{100} = 26.25$$
Total interest $$= 25+26.25$$
$$= Rs51.25$$

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Basics of Financial Mathematics Test 33

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Basics of Financial Mathematics Test 33

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SHARING IS CARING

Question 1

Factory Buildings

Office Equipment

Plant & Machinery

Land

Solution

Question 2

$$8\%$$

$$5\%$$

$$7\%$$

$$6\%$$

Solution

Question 3

Valuation

Allocation

Sale value

All of the above

Solution

Question 4

Economic life of asset

Declared life of asset by supplier

Normal life of asset

None of these

Solution

Question 5

Appreciation

Written down value

Depreciation

Accumulated depreciation

Solution

Question 6

Time factor

Obsolescence and inadequacy

Wear and tear

Money valuation

Solution

Question 7

Physical deterioration

Depletion

Obsolescence

Amortization

Solution

Question 8

$$Rs.13,310$$

$$Rs.12,550$$

$$Rs.12,000$$

$$Rs.13,500$$

Solution

Question 9

$$10$$

$$5$$

$$0$$

None of the above

Solution

Question 10

$$51.25$$

$$50$$

$$26.25$$

None of the above

Solution

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