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Annuity

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Fixed Rate Vs Floating Rate

Front End Vs Back End Interest Rates

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 Annuity :Definition

Annuities are essentially a series of fixed payments required to be paid at a specified

frequency over the course of a fixed period of time. Payment of annuities may be at the
beginning of each period or at the end of each period.

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A person wants to have Rs.2 lac annually for 20 years by investing the amount in an annuity
interest rate of 5%. He will have to invest ......
a. Rs.24 lac
b. Rs.2492440
c. Rs.2429000
d. Rs.25 lac
Ans – b

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How much will an ordinary annuity of Rs. 650 per year be worth in eight years at an annual interest rate of 6
percent?
a. Rs. 8,975.38
b. Rs. 6,897.76
c. Rs. 7,021.80
d. Rs. 6,433.38
Ans - d

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If you wish an annuity to grow to Rs. 17000 over 5 years so that you can replace your car, what monthly
deposit would be required if you could invest at the end of month @ 12%
compounded monthly?
a. 208.16
b. 218.06
c. 268.16
d. 286.06
Ans - a

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Mr. X is to invest Rs. 100000 every year for the next 5 years (at the beginning of the period) @ 5%.
How much he would have at the end of the 5-year period?
a. 508191
b. 508911
c. 580191
d. 580911
Ans - c

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The present worth of Rs. 7,020 due in two equal half-yearly installments @
8%p.a. simple interest is ......
Rs. 6,500
Rs. 6,625
Rs. 6,750
Rs. 7,000

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Madhu had availed a loan of Rs. 120000 @ 12%, which she has to pay in 6
equal annual installments. Calculate the amount of installment?
a. 21897
b. 27897
c. 28197
d. 29187

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Mr. A purchased a machinery from Mr. B on hire-purchase system, the cash price of which is Rs.1,00,000.
Payment is to be made in 3 equal annual installments including interest on the unpaid balance @10% per
annum. Each installment is to be paid at the end of each year. Calculate the amount of annual installment.

a. Rs. 33,333.33
b. Rs. 45,000
c. Rs. 66,666.67
d. Rs. 40,211.50

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X wants to borrow Rs. 25000 immediately and another Rs. 20000 after a period of 2 years @
10% roi. He wants to pay it in monthly installments for 5 years. Calculate the amount of
monthly payment.
a. 978
b. 987
c. 897
d. 879

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A Washing machine worth Rs. 10,000 is purchased on installment payment system under which 10 equal
annual installments including interest at 10% p.a. are payable. Find the amount of annual installment.
a. Rs. 1,627.00
b. Rs. 1,000.00
c. Rs. 1,333.00
d. Rs. 1,225.00

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A shopkeeper advertises the case price of a colour. T.V. as Rs. 8,500. The same T.V. can also be purchased
by paying Rs. 1,600 immediately and the balance in equal 8 installments monthly of Rs. 900 each. Find the rate
of interest.
a. 6% p.a.
b. 8% p.a.
c. 10% p.a.
d. 12% p.a.

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A loan of Rs. 1 lac is paid back in 5 equal annual installments. The ROI charged
is 20% annually. Find the amount of each loan?
a. 33348
b. 33438
c. 34348
d. 34438
Ans - b

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A farmer could not pay annual installments worth Rs. 800 each for four years. If a simple rate of interest is
calculated at the rate of 5% p.a., how much has he to pay now?
a. Rs. 3,200
b. Rs. 3,440
c. Rs. 3,640
d. Rs. 3,840
Ans – b

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A sum of money was borrowed the paid back in 2 annual installments of Rs. 1,864 and Rs1,740,
respectively. If the rate of compound interest was 16% p.a. find out the sum borrowed.
a. Rs. 3,604
b. Rs. 3,202
c. Rs. 2,900
d. Rs. 2,700
Ans – c

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A person invests some money in bonds on which interest would be received by him on halfyearly basis at
the end of each 6th month. Such payment can be said to be ......
a. At the end annuity
b. At the beginning annuity
c. Ordinary annuity
d. Sinking annuity
Ans – c

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Which among the following is not correct in the context of annuity?
a. Term of annuity-total time during which regular payments are made
b. Payment period- the regular rime periods during which payments are made
c. Ordinary annuity- where payments are made at the end of the period
d. Annuity date- when payments are made at the end of the period
Ans – d

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A sinking fund can be created for using it for (a) pay a loan in lump sum (b) to redeem a bond (c) to buy new
machinery (d) to replace a worn out equipment ......
a. A to d all
b. A, b and c only
c. A, c and d only
d. B, c and d only
Ans - a

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Thirty years ago, X bought 10 acres of land for Rs. 1,000 per acre in what is now downtown
Houston. If this land grew in value at an annual interest rate of 8 percent, what is it worth
today?
a. Rs. 1,00,630
b. Rs. 1,80,630
c. Rs. 1,00,900
d. Rs. 1,01,630
Ans - a

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To determine how long an investment will be double, you have to divide number ........ By annual rate
of interest.
a. 62
b. 64
c. 72
d. 74
Ans – c

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Annuity is defined as ……
a. Equal cash flows at equal intervals forever
b. Equal cash flows at equal intervals for a specified period
c. Unequal cash flows at equal intervals for specified period
d. Unequal cash flows at equal intervals forever
Ans – b

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