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 mathematics and statistics banks and simple interest introduction to interests introduction to interest introduction to interest payments

A sum of money compounded annually amounts to 1375 in 5 years and 1980 in 7 years. Find the annual rate of interest.

  1. 12%

  2. 20%

  3. 15%

  4. 10%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

interest is compounded, Amount $ A = P(1+ \frac {R}{100})^n $
So, for the first situation
$ 1375 = P \times (1+ \frac {R}{100})^5 $   - (1)

And for the first situation
$ 1980 = P \times (1+ \frac {R}{100})^7 $   ---- (2)

Dividing eqn 2 by eqn 1, we get
$ \frac {1980}{1375} =   (1+ \frac {R}{100})^2 $ 
$ => \frac {396}{275} =   (1+ \frac {R}{100})^2 $ 
$ => \frac {36}{25} =   (1+ \frac {R}{100})^2 $ 
$ => (1+ \frac {R}{100}) = \frac {6}{5} $
$ => \frac {R}{100} = \frac {1}{5} $
$ => R =20 $ %

Multiple choice mathematics and statistics banks and simple interest introduction to interests introduction to interest introduction to interest payments

The difference between the interest earned under compound interest, interest being compounded annually and simple interest for two years on the same sum and at the same rate of interest is 25.60. Find the sum if the rate of interest is 8% p.a

  1. 2000

  2. 2500

  3. 3200

  4. 4000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation



Simple Interest $ SI = \frac {PNR}{100} $
So, $ SI = \frac {P \times 2 \times 8}{100} = Rs 0.16P $

When interest is compounded, Amount $ A = P(1+ \frac {R}{100})^n $
So, A $ = P \times (1+ \frac {8}{100})^2 = Rs  1.1664P  $
And $ CI = A - P = 0.1664P $

Si, difference $ CI - SI = Rs 0.1664P - Rs 0.16P = Rs 25.60 $
$ => 0.0064P = 25.60 $
$ => P = Rs  4000 $

Multiple choice mathematics and statistics banks and simple interest introduction to interests introduction to interest introduction to interest payments

If the simple interest on a certain sum of money is $\displaystyle \frac{1}{100}$th of the sum and the rate per cent equals the number of years, then the rate of interest per annum is

  1. $2$%
  2. $1$%
  3. $3$%
  4. $4$%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Given $SI=\cfrac { 1 }{ 100 } \times P,R=T$
$SI=\cfrac { PRT }{ 100 } $
$\cfrac { P }{ 100 } =\cfrac { P{ R }^{ 2 } }{ 100 } \Rightarrow R=T=1$
Multiple choice mathematics and statistics banks and simple interest introduction to interests introduction to interest introduction to interest payments

The interest on a certain sum of money is $0.18$ times of itself in $3$ years. Find the rate of interest.

  1. $4$
  2. $5$
  3. $6$
  4. $7$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

$I=Interest$

$P=Principal$
$R=Rate of Interest$
$T=Time(in years)$
$0.18I=\dfrac { I\times R\times 3 }{ 100 } \ \Rightarrow R=\dfrac { 0.06\times 100 }{ 3 } =0.06\times 100\$
 $\Rightarrow R=6$ %
Rate of Interest $= 6$%

Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

_______ of a given sum of money due at the end of a certain period of time is that sum which if invested now at the given rate of interest accumulates to the given sum at the end of the period.

  1. Annuity

  2. Interest

  3. The present value

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

The present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return.

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

RBI can very CRR between _________.

  1. $5 \ to \ 15\%$
  2. $3 \ to \ 15\%$
  3. $5 \ to \ 12\%$
  4. $4 \ to \ 10\%$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Cash Reserves Ratio (CRR) refers to the proportion of total deposits of the commercial banks which they must keep as reserves with the central bank in the form of cash. Cash reserve ratio is determined by central bank so that they can control the amount of credit creation of the commercial banks at the time of inflation or deflation in the economy. By the order of the parliament, Reserve Bank of India(RBI) can vary the cash reserve ratio between 3 to 15% of the total deposits of the commercial banks. 

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

A, a partner in a firm, is driving Rs.500 regularly on the 16th of every month. He will have to pay interest at the given rate in a year on Rs.6000 for the total period of __________.

  1. 5 months

  2. 6 months

  3. 7 months

  4. 12 months
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When a partner withdraws cash from the firm for domestic use, the withdrawal of cash is termed as drawings. If the partnership deed has a provision of charging interest on drawings, the firm may charge interest on drawings from partners. Interest on drawing is a gain for the firm. It is calculated at the agreed rate. The amount of interest on drawings will be credited to Profit and Loss Appropriation Account and will be debited to partner’s capital account/current account (Individually). 

When money is withdrawn at the middle of month:

Date Amount Period
15,Jan 2016 1000 11.5
15,Feb 2016 1000 10.5
15,march 2016 1000 9.5
15,April 2016 1000 8.5
15,May 2016 1000 7.5
15,June ,2016 1000 6.5
15, July, 2017 1000 5.5
15,august,2016 1000 4.5
15,sep ,2016 1000 3.5
15, Oct ,2016 1000 2.5
15, Nov ,2016 1000 1.5 
15,Dec ,2016 1000 .5
12000 72

When money is withdrawn in the middle of the month, the average period is calculated as under:

Average Period = Total of months/12

= 72 months/12

= 6 months

OR,
Max. Period of Drawing + Min. Period of Drawing
Average Period = 2

= 11.5 + 0.5 = 12 = 6 months

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

X, a partner of X and Y Associates draw Rs, 4000 every month at the mid of the month for six months. Calculate interest on drawing at 5%.

  1. Rs. 300

  2. Rs. 295

  3. Rs. 285

  4. Rs. 310
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

So here,

4000 per month x 6 month = 24,000
then,
24,000 x 6% = 1,200 for year
then, 1,200 x 6/12 = 600 for 6 month
so, at the mid of month the interest on drawing is Rs.300.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

X Ltd issues $500, 15\%$ Debentures of Rs$100$ each on $1st$ May at a discount of $10\%$ redeemable at a premium of $5\%$ after $4$ years. Interest was payable half yearly on $30th$ June and $31st$ December. The amount of interest paid for the year ended $31st$ March is-

  1. Rs$1,250$
  2. $3,750$
  3. $Rs5,000$
  4. $Rs.6,875$
Reveal answer Fill a bubble to check yourself
C Correct answer
Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

XYZ Ltd. issued $4,000$ $12\%$ Debentures of Rs. $100$ each on $1.4.05$. Interest is payable on $30$th June and $31$st December each year. Company deducts Income Tax @$10\%$ on interest. What is the net amount of interest paid to Debenture holders on $30.6.05$?

  1. Rs. $24,000$
  2. Rs. $12,000$
  3. Rs. $10,800$

  4. Rs. Nil
Reveal answer Fill a bubble to check yourself
C Correct answer
Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

XY Ltd. has issued $12\%$ Debentures on $1.4.05$ for Rs. $4,00,000$. Interest is payable on $30$th June and $31$st Dec. every year. Amount of outstanding Interest on $31.3.06$ will be.

  1. Rs. $48,000$
  2. Rs. $36,000$
  3. Rs. $12,000$
  4. Rs. $6,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The interest is calculated on the face value of Rs. 4,00,000 at 12% per annum. From 1.1.06 to 31.3.06 (3 months), the interest accrued is 4,00,000 * 0.12 * (3/12) = 12,000.