Negative Questions MCQs for Sub-Topics of Topic 15: Financial Mathematics

Question 1. Which of the following is NOT a basic concept typically discussed when introducing interest and accumulation?

(A) Principal

(B) Amount

(C) Depreciation

(D) Time

Question 2. Which of these statements about "Interest" is FALSE?

(A) It is the cost of borrowing money.

(B) It is the return earned on an investment.

(C) It is the initial amount of money borrowed or invested.

(D) It represents the growth of money over time.

Question 3. The "Amount" in an interest calculation is NOT typically calculated as:

(A) Principal + Interest

(B) Principal $\times$ (1 + Rate $\times$ Time) (for simple interest)

(C) Principal / Interest

(D) Principal $\times$ (1 + Periodic Rate)^{Number of Periods} (for compound interest)

Question 4. Which of the following statements about "Time" in financial calculations is INCORRECT?

(A) It is the duration for which money is borrowed or invested.

(B) It must always be expressed in years for simple interest calculations.

(C) It is a key factor determining the total interest earned or paid.

(D) It does not influence the accumulated amount.

Question 5. A Periodic Interest Rate is NOT necessarily:

(A) An annual rate.

(B) A rate applied for a fixed interval.

(C) Used in compound interest calculations.

(D) A rate like monthly, quarterly, or semi-annual.

Question 6. If a bank quotes an annual interest rate of 9%, which of the following is NOT a possible representation of a related periodic rate for monthly compounding?

(A) 0.75% per month

(B) 9% per month

(C) 9% per annum

(D) $\frac{9\%}{12}$ per month

Question 7. The concept of Accumulation does NOT involve:

(A) The growth of money over time.

(B) The value of an investment at the end of a period.

(C) Adding interest to the principal.

(D) Reducing the initial principal amount.

Question 8. Which of the following would NOT directly lead to a higher accumulated amount on a principal investment over the same time period?

(A) A higher interest rate.

(B) Longer time duration (for a positive interest rate).

(C) Starting with a smaller principal.

(D) More frequent compounding (for a positive nominal rate).

Question 9. Understanding Interest and Accumulation is NOT essential for:

(A) Evaluating savings account options.

(B) Calculating loan repayments.

(C) Projecting investment growth.

(D) Determining the cost of raw materials for manufacturing.

Question 10. If the Principal amount is $\textsf{₹}X$ and the Interest earned is $\textsf{₹}Y$, the Amount is NOT:

(A) $X + Y$

(B) The total value at the end.

(C) The initial investment.

(D) Greater than or equal to $X$ (assuming $Y \ge 0$).

Question 1. Which of the following statements about Simple Interest calculation is FALSE?

(A) Interest is calculated solely on the original principal.

(B) The interest amount is the same for each equal time period.

(C) The formula $I = PRT$ (where R is decimal rate, T is years) is used.

(D) The principal amount used for interest calculation increases each period.

Question 2. If you calculate simple interest on $\textsf{₹}10,000$ at 5% per annum for 3 years, which of these results is INCORRECT?

(A) Annual interest is $\textsf{₹}500$.

(B) Total interest is $\textsf{₹}1,500$.

(C) Amount after 3 years is $\textsf{₹}11,500$.

(D) Interest in the 2nd year is higher than in the 1st year.

Question 3. To apply the standard simple interest formula $I = \frac{P \times R \times T}{100}$, which unit of time is NOT typically used for $T$ without conversion?

(A) Years

(B) Months (if R is annual rate)

(C) Days (if R is annual rate)

(D) Quarters (if R is annual rate)

Question 4. Which of the following problems CANNOT be solved directly using the simple interest formula and its rearrangements ($A = P+I$, $I=PRT/100$)?

(A) Finding the interest earned.

(B) Finding the amount accumulated.

(C) Finding the interest earned in the 3rd year if interest is compounded annually.

(D) Finding the principal amount.

Question 5. If a sum of money doubles itself in 8 years at simple interest, which statement is FALSE?

(A) The simple interest earned is equal to the principal.

(B) The annual simple interest rate is 12.5%.

(C) It will become triple itself in 16 years.

(D) It will become four times itself in 24 years.

Question 6. Accumulation with simple interest is NOT represented by the formula:

(A) $A = P + I$

(B) $A = P(1 + \frac{RT}{100})$ (R in percentage, T in years)

(C) $A = P(1 + RT)$ (R in decimal, T in years)

(D) $A = P(1+R)^T$

Question 7. If the simple interest on $\textsf{₹}X$ at $Y$% per annum for $Z$ years is $\textsf{₹}I$, then which of the following is NOT a valid relationship?

(A) $X = \frac{I \times 100}{Y \times Z}$

(B) $Y = \frac{I \times 100}{X \times Z}$

(C) $Z = \frac{I \times 100}{X \times Y}$

(D) $I = \frac{X + Y + Z}{100}$

Question 8. Which of the following would NOT be calculated using simple interest in a typical scenario?

(A) Interest on a small, short-term personal loan.

(B) Interest on a government bond that pays a fixed amount each year.

(C) Interest earned on a long-term savings account where interest is compounded regularly.

(D) Interest charged on a daily basis for overdue commercial payments.

Question 9. If Simple Interest (SI) is calculated for less than one year, which statement is NOT true?

(A) The time period $T$ should be represented as a fraction of a year.

(B) The formula $I=PRT/100$ is still applicable.

(C) The SI will be less than the annual interest (for $T<1$ year and $R>0$).

(D) The interest calculation method changes fundamentally.

Question 10. The concept of simple interest is NOT typically applied to:

(A) Short-term loans.

(B) Recurring Deposits.

(C) Fixed Deposits (sometimes, especially for short terms or if interest is paid out).

(D) Calculations involving PV of annuities.

Question 1. Which statement is NOT true about Compound Interest?

(A) Interest is earned on the principal amount.

(B) Interest is earned on the accumulated interest from previous periods.

(C) The accumulated amount grows linearly over time.

(D) It involves the concept of compounding.

Question 2. The formula for the Amount ($A$) with compound interest is $A = P(1 + i)^n$. Which of the following interpretations of the terms is INCORRECT?

(A) $P$ is the Principal.

(B) $i$ is the interest rate per compounding period.

(C) $n$ is the total number of compounding periods.

(D) $i$ is the annual interest rate even if compounding is more frequent than annually.

Question 3. If interest is compounded quarterly at an annual rate of 8%, which statement is FALSE regarding a 2-year investment?

(A) The periodic rate is 2%.

(B) The number of compounding periods is 8.

(C) The amount is calculated as $P(1 + 0.08/4)^8$.

(D) The interest is added to the principal only at the end of the 2-year period.

Question 4. Which of the following statements is NOT true when comparing simple interest (SI) and compound interest (CI) for the same principal and rate?

(A) For a period of exactly one year, SI = CI (assuming annual compounding for CI).

(B) For a period less than one year, SI > CI (assuming no intra-year compounding for CI).

(C) For a period greater than one year, CI > SI.

(D) The difference between CI and SI increases as the time period increases (for positive rates).

Question 5. If a sum of money triples itself in 6 years at compound interest, which statement is FALSE?

(A) The growth factor over 6 years is 3.

(B) It will become 9 times itself in 12 years.

(C) It will become $3^3 = 27$ times itself in 18 years.

(D) The annual compound interest rate is exactly 50%.

Question 6. Compound interest is NOT commonly used for calculating interest on:

(A) Savings bank accounts.

(B) Fixed deposits.

(C) Long-term loans like home loans.

(D) Very short-term trade credit (e.g., a few days).

Question 7. When the compounding frequency increases (e.g., from quarterly to monthly), for a given nominal annual rate, which of the following is FALSE?

(A) The periodic rate decreases.

(B) The total number of compounding periods increases.

(C) The accumulated amount at the end of the year decreases.

(D) The effective annual rate increases.

Question 8. The compound interest earned is NOT equal to:

(A) Amount - Principal

(B) $P(1 + i)^n - P$

(C) The sum of simple interest calculated on the original principal for each period.

(D) The difference between the total amount at the end and the initial principal.

Question 9. If a loan uses compound interest, which statement about the principal and interest payments is FALSE?

(A) Interest is calculated on the outstanding principal balance.

(B) In an EMI, the proportion of interest is higher initially.

(C) The total amount repaid is Principal + Total Interest.

(D) The interest component remains constant for each payment.

Question 10. Which factor does NOT affect the amount accumulated under compound interest?

(A) Principal

(B) Interest Rate

(C) Time Period

(D) Colour of the passbook

Question 1. Which statement about Nominal Interest Rate is FALSE?

(A) It is the stated or quoted rate.

(B) It accounts for the compounding frequency within a year.

(C) It is typically quoted on an annual basis.

(D) It is used to derive the periodic rate for calculation.

Question 2. The Effective Interest Rate is NOT:

(A) The actual annual rate of return/cost.

(B) Used to compare different loan/investment options.

(C) Influenced by the compounding frequency.

(D) Always equal to the nominal rate.

Question 3. If the nominal rate is 10% per annum compounded semi-annually, which statement about the effective annual rate is FALSE?

(A) The periodic rate is 5%.

(B) The number of compounding periods per year is 2.

(C) The effective annual rate is $(1 + 0.10/2)^2 - 1$.

(D) The effective annual rate is exactly 10%.

Question 4. Which of the following scenarios would NOT require comparing effective rates to make a fair financial decision?

(A) Choosing between a loan at 12% compounded monthly and 12.5% compounded quarterly.

(B) Choosing between a Fixed Deposit at 6% simple interest and 5.8% compounded semi-annually for a period greater than one year.

(C) Choosing between two identical bonds yielding the same rate but issued by different governments.

(D) Choosing between two savings accounts with different nominal rates and different compounding frequencies.

Question 5. Interest rate equivalency does NOT deal with finding:

(A) A simple interest rate equivalent to a compound interest rate over a period.

(B) A compound interest rate with one frequency equivalent to a rate with another frequency.

(C) A nominal rate equivalent to an effective rate.

(D) The total interest earned from different investments.

Question 6. Which statement about the relationship between nominal ($r_{nom}$) and effective ($r_{eff}$) rates is FALSE (assuming $r_{nom} > 0$)?

(A) $r_{eff} = r_{nom}$ when compounded annually ($m=1$).

(B) $r_{eff} > r_{nom}$ when compounded more than once a year ($m>1$).

(C) The difference $r_{eff} - r_{nom}$ decreases as $m$ increases.

(D) $r_{eff}$ reflects the impact of compounding within the year.

Question 7. If the effective annual rate on a loan is 15%, which of the following is NOT necessarily true?

(A) The nominal annual rate is 15%.

(B) The cost of borrowing $\textsf{₹}100$ for one year is $\textsf{₹}15$.

(C) The accumulation factor for one year is 1.15.

(D) If compounded monthly, the nominal rate would be less than 15%.

Question 8. A loan has a nominal rate of 12% compounded monthly. Its effective rate is approximately 12.68%. This effective rate does NOT mean:

(A) The borrower effectively pays 12.68% interest per year.

(B) A simple interest loan at 12.68% would cost the same over one year.

(C) The periodic monthly rate is 1.057% (approx).

(D) The true annual cost is higher than the stated 12% due to compounding.

Question 9. Which factor is LEAST relevant when calculating the effective annual rate?

(A) Nominal annual rate.

(B) Compounding frequency.

(C) Periodic interest rate.

(D) The principal amount.

Question 10. The concept of interest rate equivalency is primarily used for:

(A) Determining the total simple interest over multiple years.

(B) Making comparable annual returns/costs for rates with different compounding structures.

(C) Calculating the loan EMI.

(D) Evaluating bond prices.

Question 1. Which statement about the Time Value of Money (TVM) is FALSE?

(A) A rupee today is worth more than a rupee tomorrow.

(B) TVM considers the earning potential of money over time.

(C) TVM is irrelevant when comparing cash flows at different points in time.

(D) Interest rate is a key component of TVM calculations.

Question 2. Present Value (PV) is NOT:

(A) The current worth of a future sum of money.

(B) Calculated by discounting future cash flows.

(C) Always greater than the corresponding Future Value (assuming positive interest rate and time).

(D) Influenced by the discount rate and time period.

Question 3. Future Value (FV) is NOT:

(A) The value of an investment at a future date.

(B) Calculated by compounding a present sum.

(C) Always smaller than the corresponding Present Value (assuming positive interest rate and time).

(D) Used for projecting the growth of investments.

Question 4. The relationship $FV = PV \times (1+r)^n$ is used for FV calculation. Which component is NOT correctly described?

(A) $PV$ is the initial amount.

(B) $r$ is the interest rate per period.

(C) $n$ is the number of periods.

(D) $(1+r)^n$ is the discount factor.

Question 5. Net Present Value (NPV) is NOT defined as:

(A) Sum of PV of cash inflows - Sum of PV of cash outflows.

(B) The future value of all project cash flows.

(C) A measure of a project's profitability considering the time value of money.

(D) The change in the value of the firm if the project is undertaken (assuming a zero NPV represents breaking even).

Question 6. According to the NPV decision rule, a project should NOT be accepted if:

(A) Its NPV is positive.

(B) Its NPV is exactly zero.

(C) Its NPV is negative.

(D) Its NPV is greater than the initial investment.

Question 7. Which of the following is NOT a typical application of Present Value calculation?

(A) Valuing a bond that pays future coupons and principal.

(B) Determining the lump sum needed today to receive a fixed amount periodically in the future.

(C) Calculating the future value of a series of equal investments.

(D) Evaluating the profitability of a project's expected future cash flows.

Question 8. If the interest rate is 0%, which statement is FALSE?

(A) The PV of a future sum equals the FV.

(B) The FV of a present sum equals the PV.

(C) The time period has no impact on the relationship between PV and FV.

(D) Compounding and discounting are still necessary using a rate of 0.

Question 9. Discounting future cash flows does NOT involve:

(A) Bringing future values back to their current worth.

(B) Using a discount rate (required rate of return).

(C) Multiplying by a factor less than 1 (for positive rates and time).

(D) Calculating the accumulation of money over time.

Question 10. A project has an initial cost and a series of future cash inflows. The NPV is calculated by finding the PV of all cash inflows and subtracting the initial cost. If the NPV is negative, this means:

(A) The project's expected return is exactly equal to the required rate of return.

(B) The project is expected to generate returns less than the required rate of return.

(C) The project is not expected to add value.

(D) The initial cost was lower than the sum of future cash inflows (undiscounted).

Question 1. Which is NOT a characteristic of an annuity?

(A) A series of payments.

(B) Payments are of equal amount.

(C) Payments are made at fixed intervals.

(D) Payments continue indefinitely.

Question 2. An Ordinary Annuity does NOT have payments made:

(A) At the end of each period.

(B) One period from the start date.

(C) Simultaneously with the interest calculation point for the period.

(D) At the beginning of each period.

Question 3. An Annuity Due is NOT characterised by payments made:

(A) At the beginning of each period.

(B) Immediately (at time 0) for the first payment.

(C) At the end of each period.

(D) In advance.

Question 4. The formula for the Future Value of an Ordinary Annuity is $FV = Pmt \times \left[ \frac{(1+i)^n - 1}{i} \right]$. Which term is NOT correctly described?

(A) $Pmt$ is the periodic payment.

(B) $i$ is the total interest rate over the entire term.

(C) $n$ is the total number of periods.

(D) $i$ is the interest rate per period.

Question 5. The formula for the Present Value of an Ordinary Annuity is $PV = Pmt \times \left[ \frac{1 - (1+i)^{-n}}{i} \right]$. Which of the following is NOT true about this formula?

(A) It sums the future values of each payment.

(B) It calculates the lump sum equivalent today of the future payment stream.

(C) $i$ should be the rate per period matching the payment frequency.

(D) $n$ is the number of payments.

Question 6. When calculating the value of an annuity with monthly payments and an annual interest rate, which adjustment is NOT required?

(A) Convert the annual rate to a monthly rate.

(B) Convert the total time in years to months.

(C) Ensure the periodic rate and number of periods match the payment frequency.

(D) Multiply the final result by 12 to annualise it.

Question 7. Calculating the amount of a loan you can take based on your monthly repayment capacity does NOT involve:

(A) The concept of Present Value of an Annuity.

(B) Treating the loan amount as the present value of future EMIs.

(C) Using the Future Value of Annuity formula.

(D) Considering the interest rate and loan tenure.

Question 8. For the same payment amount, rate, and number of periods, which statement comparing an Ordinary Annuity and an Annuity Due is FALSE?

(A) FV of Annuity Due > FV of Ordinary Annuity.

(B) PV of Annuity Due > PV of Ordinary Annuity.

(C) The total sum of payments is different.

(D) Annuity Due values are $(1+i)$ times the corresponding Ordinary Annuity values.

Question 9. Which of the following is NOT a real-world example of an annuity?

(A) Fixed monthly salary payments.

(B) Monthly rent payments (from the landlord's perspective).

(C) Irregular quarterly dividends from a stock.

(D) Equal annual pension payments.

Question 10. If the interest rate is 0%, which statement is FALSE about the Future Value of an Ordinary Annuity?

(A) The FV equals the sum of the payments.

(B) The FV is calculated as $Pmt \times n$.

(C) The FV is greater than the sum of the payments.

(D) No interest is earned on the payments.

Question 1. Which is NOT a characteristic of a Perpetuity?

(A) Payments are equal in amount.

(B) Payments are made at fixed intervals.

(C) Payments stop after a fixed number of periods.

(D) It can have a finite present value (if the rate is positive).

Question 2. The formula for the Present Value of an Ordinary Perpetuity is $PV = Pmt/i$. Which interpretation is INCORRECT?

(A) $Pmt$ is the periodic payment.

(B) $i$ is the periodic interest rate.

(C) $PV$ is the lump sum needed today.

(D) The formula is used to find the future value of infinite payments.

Question 3. A Sinking Fund is NOT typically used for:

(A) Accumulating funds for future debt repayment.

(B) Saving for replacing a major asset in the future.

(C) Providing a perpetual stream of income.

(D) Setting aside money regularly to meet a future financial obligation.

Question 4. Calculating contributions to a sinking fund does NOT involve:

(A) Determining the target future value needed.

(B) Using the concept of the future value of an annuity.

(C) Finding the periodic payment required to reach a future sum.

(D) Using the formula for the present value of a perpetuity.

Question 5. If the interest rate earned by a sinking fund increases, which statement about the required periodic contribution (to meet the same future target in the same time) is FALSE?

(A) The required contribution will decrease.

(B) The fund will earn more total interest.

(C) The future value of the payments grows faster.

(D) The required contribution will increase.

Question 6. Which of the following is NOT an example where the perpetuity concept might be applied?

(A) Valuing preferred stock with fixed dividends.

(B) Calculating the amount needed to endow a perpetual scholarship fund.

(C) Determining the price of a bond that matures in 10 years.

(D) Estimating the value of a real estate property providing constant rental income indefinitely.

Question 7. If you want to receive a perpetual payment of $\textsf{₹}X$ per period, starting next period, and the rate is $i$ per period, the present value $X/i$ represents:

(A) The amount you need to invest today.

(B) The total sum of all future payments (which is infinite).

(C) The capital needed to generate the income stream.

(D) The lump sum value in today's terms.

Question 8. A sinking fund is established for a loan repayment. Which statement is FALSE?

(A) Periodic payments are made *into* the sinking fund.

(B) The fund accumulates interest.

(C) The final amount in the fund should equal the loan principal due.

(D) The periodic payments from the borrower *are* the sinking fund contributions.

Question 9. Compared to an ordinary annuity, a perpetuity does NOT have:

(A) Equal periodic payments.

(B) Payments at fixed intervals.

(C) A finite number of payments.

(D) A present value (for positive interest rates).

Question 10. Which concept would NOT be used when calculating the periodic payment required to save up a specific amount in the future?

(A) Future Value.

(B) Annuity.

(C) Sinking Fund.

(D) Perpetuity.

Question 1. Which is NOT a component of a typical loan agreement?

(A) Principal amount.

(B) Interest rate.

(C) Loan tenure.

(D) Guaranteed profit margin for the borrower.

Question 2. Which statement about Equated Monthly Installments (EMI) is FALSE?

(A) EMI payments are equal in amount.

(B) Each EMI covers both principal and interest.

(C) The interest component decreases over the loan tenure.

(D) The principal component decreases over the loan tenure.

Question 3. The calculation of EMI for a loan does NOT rely on the concept of:

(A) Present Value.

(B) Annuity.

(C) Compounding interest.

(D) Future Value of a single sum.

Question 4. If a loan has an annual rate of 18% compounded monthly for 5 years, which is INCORRECT for the EMI calculation?

(A) Periodic rate $r = 0.18/12 = 0.015$.

(B) Number of periods $n = 5 \times 12 = 60$.

(C) The EMI formula is $M = P \times \frac{r(1+r)^n}{(1+r)^n - 1}$.

(D) The annual rate of 18% is used directly as $r$.

Question 5. An Amortization Schedule does NOT show:

(A) The breakdown of each EMI payment.

(B) The outstanding principal balance after each payment.

(C) How much of the EMI is principal and how much is interest.

(D) The simple interest calculated on the original principal.

Question 6. If the interest rate on a loan increases (keeping principal and tenure constant), which statement about the EMI is FALSE?

(A) The EMI will increase.

(B) The total interest paid will increase.

(C) The principal component of the first EMI will decrease (as interest component increases).

(D) The EMI will decrease.

Question 7. If a borrower makes a partial prepayment on a loan, which is NOT a potential consequence?

(A) The remaining loan tenure decreases (if EMI is unchanged).

(B) The EMI decreases (if tenure is unchanged).

(C) The total interest paid over the life of the loan decreases.

(D) The interest rate on the loan increases.

Question 8. Which of the following is NOT used as an input when calculating the EMI for a loan?

(A) Principal Loan Amount

(B) Annual Interest Rate

(C) Loan Tenure

(D) Salvage Value of the asset purchased with the loan.

Question 9. If a loan of $\textsf{₹}5,00,000$ is repaid over 5 years with monthly EMIs, and the total amount repaid is $\textsf{₹}6,50,000$, which statement is FALSE?

(A) The total interest paid is $\textsf{₹}1,50,000$.

(B) The average annual interest is $\textsf{₹}30,000$ ($\textsf{₹}1,50,000 / 5$).

(C) The interest rate was 6% p.a. simple interest.

(D) The loan involved compound interest as it is a standard loan product.

Question 10. In the later stages of a loan tenure, the EMI consists of:

(A) A larger proportion of principal repayment.

(B) A smaller proportion of interest payment.

(C) An increasing interest component compared to the previous period.

(D) A decreasing outstanding principal balance.

Question 1. Which statement about Absolute Return is FALSE?

(A) It measures the total gain or loss in monetary terms.

(B) It is calculated as Final Value - Initial Value.

(C) It is expressed as a percentage of the initial investment.

(D) It does not consider the time period of the investment explicitly in its value.

Question 2. Percentage Return is NOT calculated as:

(A) $\frac{\text{Absolute Return}}{\text{Initial Value}} \times 100$

(B) $\left(\frac{\text{Final Value}}{\text{Initial Value}} - 1\right) \times 100$

(C) $(\text{Final Value} - \text{Initial Value}) \times 100$

(D) $\frac{\text{Final Value} - \text{Initial Value}}{\text{Initial Value}}$ (as a decimal)

Question 3. A Nominal Rate of Return does NOT account for:

(A) The stated interest rate.

(B) The effect of inflation.

(C) The compounding frequency within a year (when quoted as 'p.a. compounded X').

(D) The principal amount invested.

Question 4. Which statement about Compound Annual Growth Rate (CAGR) is FALSE?

(A) It represents the average annual growth rate over a period.

(B) It assumes a constant growth rate each year.

(C) It is calculated using the formula $(End Value / Start Value)^{1/n} - 1$.

(D) It directly shows the year-on-year fluctuations in returns.

Question 5. In the CAGR formula $(End Value / Start Value)^{1/n} - 1$, $n$ does NOT represent:

(A) The total number of years in the period.

(B) The number of compounding periods per year.

(C) The exponent to which the growth factor is raised.

(D) The duration between the Start Value and End Value dates.

Question 6. CAGR is NOT the best metric for comparing investments when:

(A) The investments have different durations.

(B) You want to see the cumulative effect of growth over several years.

(C) You need to evaluate the performance volatility of the investment within the period.

(D) The returns fluctuate significantly from year to year.

Question 7. If an investment decreased in value over a 3-year period, which statement is FALSE?

(A) The Absolute Return is negative.

(B) The Percentage Return is negative.

(C) The CAGR is positive.

(D) The End Value is less than the Start Value.

Question 8. Which of the following is NOT a standard application of CAGR?

(A) Comparing revenue growth across different companies.

(B) Analysing the growth of your investment portfolio over a decade.

(C) Projecting the simple interest earned on a short-term loan.

(D) Evaluating the performance of a mutual fund over 5 years.

Question 9. If the CAGR of an investment is 10% over 5 years, which statement is FALSE?

(A) The investment value increased over the period.

(B) The Start Value * (1 + 0.10)⁵ = End Value.

(C) The simple average annual return must also be exactly 10%.

(D) It provides an annualised rate of growth.

Question 10. When calculating investment returns, which measure explicitly considers the compounding effect over multiple periods?

(A) Absolute Return.

(B) Simple Average Return.

(C) Percentage Return (single period).

(D) CAGR.

Question 1. Which is NOT a reason why businesses depreciate assets?

(A) To allocate the cost of the asset over its useful life.

(B) To match the expense of using the asset with revenue.

(C) To reflect the asset's increasing market value over time.

(D) To account for wear and tear or obsolescence.

Question 2. The Straight-Line Method of Depreciation does NOT assume:

(A) That the asset loses value evenly over time.

(B) A constant annual depreciation expense.

(C) That the asset's book value declines linearly.

(D) That the asset loses more value in its early years.

Question 3. The formula for annual depreciation using the Straight-Line Method is $\frac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life}}$. Which input is NOT required?

(A) Original Cost.

(B) Useful Life.

(C) Salvage Value.

(D) Market Value at the end of year 1.

Question 4. Which statement about Book Value is FALSE?

(A) It is the value of an asset on the balance sheet.

(B) It is calculated as Original Cost - Accumulated Depreciation.

(C) It represents the asset's current market value.

(D) It declines over the asset's useful life (assuming positive depreciation).

Question 5. If an asset costs $\textsf{₹}5,00,000$, has a useful life of 5 years, and a salvage value of $\textsf{₹}50,000$, which is FALSE using Straight-Line Depreciation?

(A) Depreciable amount is $\textsf{₹}4,50,000$.

(B) Annual depreciation is $\textsf{₹}90,000$.

(C) Book value at end of Year 5 is $\textsf{₹}50,000$.

(D) Accumulated depreciation at end of Year 5 is $\textsf{₹}5,00,000$.

Question 6. Accumulated Depreciation does NOT represent:

(A) The total depreciation expense charged so far.

(B) The reduction in the asset's book value from its cost.

(C) The current market value of the asset.

(D) The sum of annual depreciation charges.

Question 7. If an asset is sold for its book value, which statement is FALSE?

(A) There is no gain or loss on the sale.

(B) The selling price equals the book value.

(C) The accumulated depreciation equals the total depreciation charged.

(D) The salvage value must be zero.

Question 8. Depreciation expense is a non-cash expense. This means:

(A) It affects the company's reported profit.

(B) It reduces the company's taxable income.

(C) No actual cash is paid out specifically for depreciation in that period.

(D) It increases the company's cash flow.

Question 9. Which factor is NOT necessary to calculate the depreciable amount of an asset?

(A) Original Cost.

(B) Salvage Value.

(C) Useful Life.

(D) Depreciable Amount is Cost - Salvage Value.

Question 10. Depreciation is NOT primarily concerned with:

(A) Asset valuation on the balance sheet.

(B) Tax planning.

(C) Accounting for the wear and tear of assets.

(D) Determining the asset's current market selling price.

Question 1. Which of the following is NOT a type of tax commonly discussed?

(A) Direct Tax

(B) Indirect Tax

(C) Simple Tax

(D) Income Tax

Question 2. Which is NOT an example of a Direct Tax in India?

(A) Income Tax

(B) Corporate Tax

(C) Wealth Tax (if applicable)

(D) Goods and Service Tax (GST)

Question 3. Which is NOT a characteristic of an Indirect Tax?

(A) The burden can be shifted.

(B) It is typically levied on goods and services.

(C) Income Tax is an example.

(D) GST is an example.

Question 4. Taxable Income is NOT calculated by subtracting:

(A) Eligible deductions from Gross Total Income.

(B) Exempt incomes from Gross Total Income.

(C) Tax paid from Gross Total Income.

(D) Allowable expenses from Gross Total Income (in specific cases).

Question 5. Tax Slabs do NOT:

(A) Define the different rates for different income ranges.

(B) Contribute to making the income tax system progressive.

(C) Determine the total tax paid by everyone.

(D) Apply different percentages to different parts of the taxable income.

Question 6. Which is NOT true about Goods and Service Tax (GST)?

(A) It is a consumption-based tax.

(B) It replaced several old indirect taxes.

(C) Input Tax Credit (ITC) is a feature of GST.

(D) It is levied on income.

Question 7. Input Tax Credit (ITC) does NOT allow businesses to:

(A) Set off tax paid on inputs against output tax liability.

(B) Avoid the cascading effect of taxes.

(C) Get a refund of all taxes paid on business expenses (unconditionally).

(D) Pay tax only on the value added.

Question 8. If the price of a product including 18% GST is $\textsf{₹}1,180$, which statement is FALSE?

(A) The base price before GST was $\textsf{₹}1,000$.

(B) The GST amount was $\textsf{₹}180$.

(C) The calculation is $1180 = \text{Base Price} \times (1 + 0.18)$.

(D) The base price was $\textsf{₹}1,180 \times 0.18$.

Question 9. Simple applications of tax calculation (like GST or Income Tax scenarios) do NOT typically involve:

(A) Calculating a percentage of a value.

(B) Applying different rates to different income/value slabs.

(C) Understanding deductions or credits.

(D) Complex derivatives or integrals.

Question 10. If a person's taxable income falls into the 20% tax slab, it is NOT true that:

(A) All of their income is taxed at 20%.

(B) Income below the 20% slab threshold is taxed at lower rates (or 0%).

(C) The tax is calculated segment by segment based on the slabs.

(D) Their tax liability will be 20% of their total Gross Total Income.

Question 1. Which is NOT a common component found on a typical utility bill (electricity, water, gas)?

(A) Usage/Consumption quantity.

(B) Applicable Tariff Rates.

(C) Fixed Charge.

(D) Loan EMI amount.

Question 2. Tariff Rates on a utility bill do NOT represent:

(A) The cost per unit of the utility (e.g., $\textsf{₹}$/kWh).

(B) How the rate changes based on consumption levels (in tiered tariffs).

(C) The total final amount to be paid.

(D) The rate applied to calculate the usage charge.

Question 3. If an electricity bill uses tiered tariff rates where rates increase with consumption, which statement is FALSE?

(A) The first block of consumption is charged at the lowest rate.

(B) Units consumed above a certain threshold are charged at a higher rate.

(C) The average cost per unit decreases as total consumption increases.

(D) Calculating the total energy charge involves applying different rates to different consumption blocks.

Question 4. Fixed Charges on a utility bill are NOT:

(A) Constant regardless of the amount of utility consumed in a period.

(B) Designed to cover infrastructure and service delivery costs.

(C) Always zero for low consumption users.

(D) A mandatory part of the bill for connection availability.

Question 5. A Surcharge on a utility bill is NOT typically a:

(A) Penalty for late payment.

(B) Charge to recover fluctuating fuel costs.

(C) Discount for early payment.

(D) Mandatory additional fee.

Question 6. To calculate your electricity consumption for a month, you would NOT:

(A) Note down the meter reading at the start of the month.

(B) Note down the meter reading at the end of the month.

(C) Add the start and end meter readings.

(D) Subtract the start reading from the end reading.

Question 7. A Service Charge on a bill does NOT cover:

(A) Costs related to billing and account management.

(B) Meter maintenance or reading costs.

(C) The basic cost per unit of the utility consumed.

(D) Specific administrative services.

Question 8. When interpreting a utility bill, checking the Billing Period is important because:

(A) It determines the tariff rates applied.

(B) It shows the duration for which the usage is calculated.

(C) It influences the number of days for which fixed charges apply.

(D) It does not affect the total bill amount.

Question 9. Problems based on utility bill calculations do NOT typically involve:

(A) Calculating charges based on multi-tiered tariffs.

(B) Adding fixed charges and surcharges to usage charges.

(C) Calculating GST on the total bill amount.

(D) Determining the compounding frequency of interest on the usage charge.

Question 10. Which component of a bill is LEAST likely to vary based on the quantity of the utility consumed in a given billing cycle?

(A) Usage Charge.

(B) Fixed Charge.

(C) Tiered Tariff Rate (for a specific consumption block).

(D) Total Bill Amount.