Quantitative Aptitude · Commerce Accountancy

Interest and Annuities

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When money is withdrawn at the middle of month: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When money is withdrawn in the middle of the month, the average period is calculated as under: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

Multiple choice

What is the formula for calculating the future value of a single sum?

  1. FV = PV * (1 + r)^n

  2. FV = PV * (1 - r)^n

  3. FV = PV * r^n

  4. FV = PV / (1 + r)^n
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The formula for calculating the future value (FV) of a single sum is FV = PV * (1 + r)^n, where PV is the present value, r is the interest rate, and n is the number of compounding periods.

Multiple choice

What is the formula for calculating the present value of a single sum?

  1. PV = FV / (1 + r)^n

  2. PV = FV * (1 + r)^n

  3. PV = FV * r^n

  4. PV = FV - r^n
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The formula for calculating the present value (PV) of a single sum is PV = FV / (1 + r)^n, where FV is the future value, r is the interest rate, and n is the number of compounding periods.

Multiple choice

What is the formula for calculating the future value of an annuity?

  1. FV = PMT * [(1 + r)^n - 1] / r

  2. FV = PMT * [(1 - r)^n - 1] / r

  3. FV = PMT * r^n

  4. FV = PMT / [(1 + r)^n - 1] / r
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The formula for calculating the future value (FV) of an annuity is FV = PMT * [(1 + r)^n - 1] / r, where PMT is the periodic payment, r is the interest rate, and n is the number of compounding periods.

Multiple choice

What is the formula for calculating the present value of an annuity?

  1. PV = PMT * [1 - (1 + r)^-n] / r

  2. PV = PMT * [1 - (1 - r)^-n] / r

  3. PV = PMT * r^n

  4. PV = PMT / [1 - (1 + r)^-n] / r
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The formula for calculating the present value (PV) of an annuity is PV = PMT * [1 - (1 + r)^-n] / r, where PMT is the periodic payment, r is the interest rate, and n is the number of compounding periods.

Multiple choice

What is the formula for calculating the internal rate of return (IRR) of an investment?

  1. IRR = (FV - PV) / PV

  2. IRR = (FV + PV) / PV

  3. IRR = (FV - PV) / FV

  4. IRR = (FV + PV) / FV
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The formula for calculating the internal rate of return (IRR) of an investment is IRR = (FV - PV) / PV, where FV is the future value, PV is the present value, and n is the number of compounding periods.

Multiple choice

What is the interest rate on federal student loans?

  1. 4.99%

  2. 5.05%

  3. 5.75%

  4. 6.88%
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The interest rate on federal student loans is 4.99%.

Multiple choice

What is the interest rate charged on outstanding income tax dues?

  1. 1% per month

  2. 2% per month

  3. 3% per month

  4. 4% per month
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Interest at the rate of 1% per month is charged on outstanding income tax dues.

Multiple choice

What is the interest rate charged on outstanding GST dues?

  1. 1% per month

  2. 2% per month

  3. 3% per month

  4. 4% per month
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Interest at the rate of 1% per month is charged on outstanding GST dues.

Multiple choice

A sum of money doubles itself in 10 years at a certain rate of simple interest. What is the rate of interest per annum?

  1. 5%

  2. 10%

  3. 15%

  4. 20%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Let the sum of money be P and the rate of interest be r. According to the question, P * (1 + r * 10) = 2P. Dividing both sides by P, we get 1 + r * 10 = 2. Subtracting 1 from both sides, we get r * 10 = 1. Therefore, r = 1 / 10 = 0.1 = 10%.

Multiple choice

A sum of money doubles itself in 10 years at a certain rate of simple interest. What is the rate of interest per annum?

  1. 5%

  2. 10%

  3. 15%

  4. 20%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Let the sum of money be P and the rate of interest be r. According to the question, P * (1 + r * 10) = 2P. Dividing both sides by P, we get 1 + r * 10 = 2. Subtracting 1 from both sides, we get r * 10 = 1. Therefore, r = 1 / 10 = 0.1 = 10%.