MCQ

MCQ 11 Mark

If C is the original cost of an asset, S is the salvage value of the asset and $n$ is the number of year estimated for useful life of the asset, the annual depreciation of the asset is given by

A
$D=\frac{C-S}{n}$
B
$D=\frac{S-C}{n}$
✓
$D=\frac{C+S}{n}$
D
$D=\frac{S}{C} \times n$

Answer

Correct option: C.

$D=\frac{C+S}{n}$

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MCQ 21 Mark

EMI depends on the following factors:

A
The amount of loan
B
The loan tenure
C
The interest rate
✓
All of these

Answer

Correct option: D.

All of these

(D) All of these

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MCQ 31 Mark

Reema has an initial investment of ₹ 1,00,000 in an investment plan. After 5 years, it has grown to $2,00,000$ then rate of return is:

A
$50 \%$
✓
$100 \%$
C
$75 \%$
D
$200 \%$

Answer

Correct option: B.

$100 \%$

(B) 100%
Explanation: Rate of Return
$
\begin{array}{l}
=\frac{2,00,000-1,00,000}{1,00,000} \times 100 \\
=100 \%
\end{array}
$

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MCQ 41 Mark

A company buys a machine at a cost of ₹ 5000. The company decides on a salvage value of ₹ 1000 and a useful life of 5 years, then annual depreciation cost is:

A
₹ 500
B
₹ 600
C
₹ 700
✓
₹ 800

Answer

Correct option: D.

₹ 800

(D) ₹ 800

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MCQ 51 Mark

Assume that Shyam holds a perpetual bond that generates an annual payment of ₹ 500 each year. He believes that the borrower is creditworthy and that an $8 \%$ interest rate will be suitable for this bond. The present value of this perpetuity is:

A
₹ 6520
✓
₹ 6250
C
₹ 5620
D
₹ 2650

Answer

Correct option: B.

₹ 6250

(B) = ₹ 6250
Explanation: $P V$ of perpetuity
$
\begin{array}{l}
=\frac{\text { Annual Payment/Cash flow }}{\text { Interest rate/yield }} \\
=\frac{500}{\frac{8}{100}} \\
=\frac{500}{0.08}
\end{array}
$
=₹ 6250

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MCQ 61 Mark

Assume that the year-end revenues of a business over a three period, are mentioned in the following table:

Year End	31-12-2018	31-12-2021
Year End Revenue	9,000	13,000

Calculate the CAGR of revenues over, three-years period spanning the "end" of 2018 to the "end" of 2021. Given that $\left(\frac{13}{9}\right)^{\frac{1}{3}}=1.13$

✓
$13 \%$
B
$14 \%$
C
$15 \%$
D
None of these

Answer

Correct option: A.

$13 \%$

(A) 13%
Explanation: The CAGR of the revenues over the three years period spanning the "end" of 2018 to "end" of 2021 is
$
\begin{aligned}
\left(\frac{\text { Final value }}{\text { Initial Value }}\right)^{\frac{1}{n}}-1 & =\left(\frac{13000}{9000}\right)^{\frac{1}{3}}-1 \\
& =1.13-1 \\
& =0.13 \\
& =13 \%
\end{aligned}
$

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MCQ 71 Mark

The present value of perpetuity of ₹ 600 payable at end of every 6 month be ₹ 10,000. Find rate of interest.

A
$10 \%$
✓
$12 \%$
C
$6 \%$
D
$12.5 \%$

Answer

Correct option: B.

$12 \%$

(B) 12%
Explanation: Let rate of interest be $r \%$ per annum, then
$
i=\frac{r}{200}
$
Given,
R=₹ 600 and P=₹ 10,000
Using $P=\frac{R}{i}$
$\Rightarrow \quad i=\frac{R}{P}=\frac{600}{10,000}$
$\Rightarrow \quad \frac{r}{200}=\frac{600}{10,000}$
$\Rightarrow \quad r=\frac{120,000}{10,000}$
$=12 \%$

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MCQ 81 Mark

The sum of money is needed now, so as to get ₹ 6000 at the beginning of every month forever, then the money is worth $6 \%$ per annum compounded monthly is:

A
₹ 1000000
✓
₹ 1206000
C
₹ 60,000
D
₹ 1600000

Answer

Correct option: B.

₹ 1206000

(B) = ₹ 12,06,000
Explanation: Given R=₹ 6000,
$r=\frac{6}{12} \%=0.5$ per month
So,$
i=\frac{0.5}{100}=0.005
$
So,$
\begin{aligned}
P & =R+\frac{R}{i} \\
& =6000+\frac{6000}{0.005} \\
& =6000+1200000
\end{aligned}
$
= ₹ 12,06,000

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MCQ 91 Mark

The value of a machine purchased two years ago, depreciates at the annual rate of $10 \%$. If its present value is ₹ 97,200, then its value after 3 years is:

A
₹ 70,859 approx
B
₹ 71,895 approx
C
₹ 80,859 approx
D
₹ 88,509 approx

Answer

₹ $70,859$ approx
Explanation: Given, $P$= ₹ $97,200, i=10 \%$ p.a.
$\Rightarrow \quad i=\frac{10}{100}=0.1$
So, value after 3 years
$\begin{array}{l}=97,200 \times(1-0.1)^3 \\ =97,200 \times 0.729\end{array}$
= ₹ $70,858.80$
= ₹ 70,859 (approx.)

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MCQ 101 Mark

A machine costing ₹ 50,000 has a useful life of 4 years. The estimated scarp value is ₹ 10,000, then the annual depreciation is:

A
₹ 20,000
✓
₹ 10,000
C
₹ 5,000
D
₹ 2,500

Answer

Correct option: B.

₹ 10,000

(B) ₹ 10,000
Explanation: Annual depreciation
$
\begin{array}{l}
=\frac{\text { Original cost }- \text { Scrap value }}{\text { Useful life }} \\
=\frac{50,000-10,000}{4}
\end{array}
$
$=\frac{40,000}{4}$
=₹ 10,000

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MCQ 111 Mark

The present value of a sequence of payment of ₹ 1000 made at the end of every 6 months and continuing forever, if money is worth $8 \%$ per annum compounded semi-annually is:

A
1000
B
2500
✓
25000
D
15000

Answer

Correct option: C.

25000

(C) 25,000
Explanation: The given annuity is a perpetuity.
$
\text { present value of perpetuity }=\frac{\text { Cash flow }}{\text { Interest rate }}
$
Here, $\quad$ cash flow =₹ 1000
interest rate $=\frac{8 / 2}{100}$
$=\frac{4}{100}=0.04$
So, $\quad$ present value $=\frac{1000}{0.04}$
=₹ 25,000

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