Quantitative Aptitude · Commerce Accountancy

Interest and Annuities

621 Questions

Interest and annuities represent a critical quantitative aptitude section focusing on the mathematical calculation of simple interest, compound interest, and future values of investments. Questions challenge candidates to determine maturity values, compute recurring deposit returns, and calculate prevailing interest rates. Mastery of this topic is essential for scoring high in banking and SSC examinations.

Simple and compound interestFuture value of annuitiesRecurring deposit calculationsInterest rate determinationPresent value formulas

Interest and Annuities Questions

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

Find the future value of an ordinary amount of Rs 4000 each six months for 10 years at 8% per annum , compounded semi-annually.

  1. $123877$
  2. $175640$
  3. $213457$
  4. $324156$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

$P=Rs.4000$

Amount payable in half yearly so $,r=8\%/2=4\%,t=10\times 2=20$
$A=\sum _{ n=1 }^{ 20 }{ P{ (1+\cfrac { r }{ 100 } ) }^{ n } } \ =\sum _{ n=1 }^{ 20 }{ 4000{ (1+\cfrac { 4 }{ 100 } ) }^{ n } } \ =4000\times 30.969\ =Rs.123877$

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

Find the least number of years for which an annuity Rs 1000 must run in order that its amount just exceeds Rs 16000 at 5% pa. compounded annually.

  1. $12$
  2. $9$
  3. $2$
  4. $25$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

$P=4000, r=5\%$

$A=\sum _{ n=1 }^{ n _0 }{ P{ (1+\cfrac { r }{ 100 } ) }^{ n } } \ =\sum _{ n=1 }^{ n _0 }{ 1000{ (1+\cfrac { 5 }{ 100 } ) }^{ n }\  } >1600\ =\sum _{ n=1 }^{ n _0 }{ { (1+\cfrac { 5 }{ 100 } ) }^{ n }\  } >16$
Since it is a sum of a infinite GP. We can write it as a
$\cfrac  {(1.05^{n _0}-1)}{(1.05-1)}\times 1.05>16$
$\implies (1.05)^{n _0}>1.7619$
Taking log on both sides
$\implies \log{(1.05)^{n _0}}>\log 1.7619$
$\implies n _0>\cfrac{\log (1.7619)}{\log (1.05)}$
$\implies n _0>11.6$
$\implies n _0=12$
Hence, least no. of years$=12$.

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

Find the amount of the annuity of Rs 150 payable in half yearly instalments  for 15 years at 4% per annum interest also payable half yearly

  1. Rs.$9903.45$
  2. Rs.$3003.45$
  3. Rs.$8103.45$
  4. Rs.$3103.45$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

$P=Rs.150$

Amount payable in half yearly so $,r=4\%/2=2\%,t=15\times 2=30$
$A=\cfrac{1}{2}\sum _{ n=1 }^{ 30 }{ P{ (1+\cfrac { r }{ 100 } ) }^{ n } } \ =\cfrac{1}{2}\sum _{ n=1 }^{ 30 }{ 150{ (1+\cfrac { 2 }{ 100 } ) }^{ n } } \ =75\times 41.38\ =Rs.3103.45$

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

A sum of Rs 2522 is borrowed from a money lender at 5% per annum compounded annually.If this amount is to be paid back in 3 equal instalments , find the annual instalments (approximately).

  1. 925

  2. 800

  3. 875

  4. 567
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

$P=\cfrac{A}{(1+\cfrac{R}{100})^n}$

$\implies 2522= \cfrac{A}{(1+\cfrac{5}{100})^1}$$+\cfrac{A}{(1+\cfrac{5}{100})^2}+$$\cfrac{A}{(1+\cfrac{5}{100})^3}$
$ \implies A=926\approx 925$

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

What is the amount of annuity(approximately) due of Rs 100 yearly payable half yearly for 15 years at 10 % compound interest per annum half yearly.

  1. 3491

  2. 1456

  3. 5434

  4. 2341
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

$r=\cfrac{10\%}{2}=5\%,n=2\times 15=30,A=Rs.100$

Amount of annuity due payable half yearly
$=(1/2)\cfrac{A}{r}\times (1+r)\times[(1+r)^n-1]$
$=(1/2)\cfrac{100}{0.05}\times (1+0.05)\times[(1+0.05)^{30}-1]\=Rs.3488\approx  Rs.3491$

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

Suppose you deposit $ \$900$ per month into an account that pays $4.8 \%$ interest, compounded monthly. How much money will you have after $9$ months? 

  1. $ $8432.97$
  2. $ $1372.44$
  3. $ $9812.97$

  4. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Here, $P=\$900,\,R=4.8\%$ and $T=9$ months $=\dfrac{3}{4}$ year

$\Rightarrow$ $A=P\left (1+\dfrac{R}{100}\right)^{4T}$
$\Rightarrow$ $A=900\times \left (1+\dfrac{4.8}{100}\right)^{4\times \frac{3}{4}}$
$\Rightarrow$ $A=900\times \left (\dfrac{131}{125}\right)^3=900\times 1.1510$
$\Rightarrow$ $A=\$1035.9$

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

What amount should be set aside at the end of each year to amount Rs 10 lakhs at the end of 15 years at 6% per annum compound interest?

  1. $5298994$
  2. $3297000$
  3. $4297994$

  4. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

$A=10,00,000, t=15,r=6\%$

$A=\sum _{ n=1 }^{ 14 }{ P{ (1+\cfrac { r }{ 100 } ) }^{ n }+P } $
$\implies 10,00,000=P[\sum _{ n=1 }^{ 14 }{ { (1+\cfrac { 6 }{ 100 } ) }^{ n }+ 1} ]$
$\implies 10,00,000\times (22.276+1)\ \implies P=Rs.42963$

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

Find the amount of annuity of Rs. 4,000 per annum for 10 years reckoning interest at 10% p.a.
[Given : $(1.1)^{10} = 2.594$]

  1. Rs. 63,760

  2. Rs. 63,670

  3. Rs. 63,205

  4. None.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

$P=Rs.4000$

$n=10$
$x=10$%
    $=\dfrac { 10 }{ 100 } =0.1$
$M=\dfrac { P }{ r } \left( { \left( 1+r \right)  }^{ n }-1 \right) $
     $=\dfrac { 4000 }{ 0.1 } \left( { \left( 1.1 \right)  }^{ 10 }-1 \right) $
     $=40000(2.594-1)$
     $=63760$.
$\therefore $  Amount of annuity $=63760$

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

The present value of an annuity of Rs. $3,000$ for $15$ years at $4.5\%$ p.a. CI is?

  1. Rs. $23,809.41$
  2. Rs. $32,218.63$
  3. Rs. $32,908.41$

  4. None of the above
Reveal answer Fill a bubble to check yourself
B,D Correct answer
Explanation

Payment $P=3000$

$n=15$ years
rate=$4.5%$
$\therefore r=\cfrac { 4.5 }{ 100 } \ =0.045\ PV=P\left( \cfrac { 1-(1+r)^{ -n } }{ r }  \right) \ =3000(\cfrac { 1-(1+(1+0.045)^{ -15 } }{ 0.045 } )\ =3000(\cfrac { 1-(1.045)^{ -15 } }{ 0.045 } )\ =32218.63$
 $\therefore PV$ of the annuity is 
 $32218.63.$

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

Rs. $200$ is invested at the end of each month in an account paying interest $6\%$ per year compounded monthly. What is the future value of this annuity after $10$th payment? Given that $(1.005)^{10}=1.0511$.

  1. $2,044$
  2. $2,404$
  3. $2,440$
  4. $2,004$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A$=$Rs. $200$
$n=10$
i$=6\%$ p.a. $=6/12\%$ per month $=0.005$
Future value of annuity after $10$ months is given by
A(n, i)$=A\left[\displaystyle\frac{(1+i)^n-1}{i}\right]$
$A(10, 0.005)=200\left[\displaystyle\frac{(1+0.005)^{10}-1}{0.005}\right]$
$=$Rs. $2,044$.

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

Find the future value of an annuity of Rs. $500$ made annually for $7$ years at interest rate of $14\%$ compounded annually. Given that $(1.14)^7=2.5023$.

  1. $5,563.25$
  2. $5,365.35$
  3. $5,365.53$
  4. $5,356.35$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Annual payment A$=$Rs. $500$
$n=7$
$i=14\%=0.14$
$A(7, 0.14)=500\left[\displaystyle\frac{(1+1.014)^7-1}{0.14}\right]$
$=$Rs. $5365.35$

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

Veena is allotted an LIG flat for which she has to make an immediate payment of $ $ 100,000$ and $10$ semi-annual payments of $ $50,000$ each, the first being made at the end of $3$ years. If money is worth $10\%$ per annum compounded half-yearly, find the cash price (in $) of the flat.

  1. $302,509$
  2. $400,509$
  3. $302,009$
  4. $402,509$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

$\Rightarrow$  Cash price = Down payment + Present value of annuity    --- ( 1 )

$\Rightarrow$  Here, down payment is $\$100,000$, while we have annuity 10 terms i.e. $n$, deferred for $2\dfrac{1}{2}$ years i.e. 5 terms.
$\Rightarrow$  Each installment, $A = \$50,000$
$\Rightarrow$  Rate of interest, $r=10\%\, p.a.$ compounded half-yearly = 0.05
$\Rightarrow$  $m=5$ and $m+n=15$
$\therefore$  Present value of annuity,
$\Rightarrow$  $V=\dfrac{A}{r}\times [\dfrac{1}{(1+r)^m}-\dfrac{1}{(1+r)^{m+n}}]$
$\Rightarrow$  $\dfrac{50,000}{0.05}\times [(1.05)^{-5}-(1.05)^{-15}]$
$\Rightarrow$  $\$ 302509.07$
Now, from ( 1 )
$\Rightarrow$  Cash price of the flat = $\$100,000+\$302,509=\$402,509$

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

An investor deposits Rs 1000 in a saving institution. Each payment is made at the end of year.If the payment deposited earns 12% interest compounded annually how much amount(approximately) will he receive at the end of 10 years.

  1. $1234$
  2. $2345$
  3. $17548$
  4. $4567$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

$P=Rs.1000,r=12\%,t=10$

$A=\sum _{ n=1 }^{ 9 }{ P{ (1+\cfrac { r }{ 100 } ) }^{ n }+P } \ =\sum _{ n=1 }^{ 9 }{ 1000{ (1+\cfrac { 12 }{ 100 } ) }^{ n }+1000 } \ =3000\times 16.548\ =Rs.17548$

Multiple choice business mathematics and statistics insurance and annuity amount of an annuity annuities financial mathematics

A man decides to deposit Rs 3000 at the end of each year in a bank which pays 3% p.a compound interest . If the instalments are allowed to accumulate , what will be the total accumulation at the end of 15 years.

  1. Rs.$57450$
  2. Rs.$67780$
  3. Rs.$67050$
  4. Rs.$98450$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

$P=Rs.3000,r=3\%,t=15$
$A=\sum _{ n=1 }^{ 15 }{ P{ (1+\cfrac { r }{ 100 } ) }^{ n } } \ =\sum _{ n=1 }^{ 15 }{ 3000{ (1+\cfrac { 3 }{ 100 } ) }^{ n } } \ =3000\times 19.15\ =Rs.57450$