NPTEL Course

Financial Management
Assignment III

1. According to the rule of 69, the doubling period is equal to:

a. 0.25 + (69 / Interest Rate)
b. 0.35 + (69 / Interest Rate)
c. 0.69 + (0.35 / Interest Rate)
d. 0.69 + (0.25 / Interest Rate)
2. In a loan amortisation schedule, over the years which is true regarding the
components of EMI:
a. The interest amount increases
b. The principal repayment amount increases
c. The annual instalment amount decreases
d. Both a and c
3. If the income from an investment grows eightfold in three years, the annual growth
rate is:
a. 100 percent
b. 80 percent
c. 60 percent
d. 150 percent
4. A bank pays interest at 8% per annum compounded half yearly on its cumulative
deposits. What is the effective interest rate?
a. 8.24%
b. 8.22%
c. 8.16%
d. 8.18%
5. The maturity value of a deposit in one year is Rs.80,000 and in two years is
Rs.100,000. What interest rate per annum is earned on that deposit?
a. 12 percent
b. 15 percent
c. 20 percent
d. 25 percent
6. Deposits in a sinking fund is an example of:
a. Deferred Annuity
b. Annuity Due
c. Regular Annuity
d. Either a or c
7. For a depositor, when the frequency of compounding is increased
a. Additional gains increase
b. Additional gains dwindle
c. Additional gains are unaffected
d. There are no additional gains
 8. Heterogeneous cash flows can be made comparable by
a. Discounting technique
b. Compounding technique
c. Either a or b
d. None of the above
9. If a loan of Rs. 30,000 is to be paid in 5 annual instalments with interest rate of 12%
p.a. then the equal annual instalment will be;
a. Rs. 7400
b. Rs. 8100
c. Rs. 7812
d. Rs. 8322
10. In order to find out the present value of a sum of Rs. 10,000 to be received at the end
of each year for the next 5 years at 10% rate, we use:
a. Future value of a single cash flow table
b. Present value of a single cash flow table
c. Present value of annuity table.
d. Future value of annuity table
11. What is the present value of a Rs. 1,000 ordinary annuity that earns 8% annually for a
period of 10 years?
a. Rs. 6500
b. Rs. 6710
c. Rs. 6750
d. Rs. 6170
12. Interest rate which is not reinvested but is earned is classified as
a. simple interest
b. invested interest
c. earned interest
d. stated interest
ANSWER KEY
1(b) 2(b) 3(a) 4(c) 5(d) 6(d)
7(a) 8(c) 9(d) 10(c) 11(b) 12(a)