Single Best Answer MCQs for Sub-Topics of Topic 15: Financial Mathematics

Question 1. What is the term used for the initial amount of money invested or borrowed?

(A) Amount

(B) Interest

(C) Principal

(D) Accumulation

Question 2. The total money received back from a loan, including the principal and the extra payment for using the money, is called the:

(A) Interest

(B) Principal

(C) Amount

(D) Deposit

Question 3. Interest is fundamentally the:

(A) Initial amount invested

(B) Period over which money is borrowed

(C) Cost of borrowing money or the return on investment

(D) Total value at the end of the period

Question 4. The duration for which the money is borrowed or invested is referred to as:

(A) Rate

(B) Term

(C) Amount

(D) Principal

Question 5. An interest rate is typically expressed as a percentage per unit of:

(A) Time

(B) Principal

(C) Interest earned

(D) Amount accumulated

Question 6. An annual interest rate specifies the interest rate for a period of:

(A) One month

(B) Six months

(C) One year

(D) Ten years

Question 7. A periodic interest rate refers to the interest rate applied over a period:

(A) That is always one year

(B) That is less than a year (e.g., monthly, quarterly)

(C) That is always greater than a year

(D) That is not related to time

Question 8. If an annual interest rate is 12%, the monthly periodic rate is:

(A) 12%

(B) 1%

(C) 2%

(D) 0.12%

Question 9. The concept of accumulation primarily deals with:

(A) The initial principal amount

(B) The total value of an investment or loan at a future point in time

(C) The interest earned over a short period

(D) The process of reducing debt

Question 10. Which factor directly influences the accumulation of money over time?

(A) Principal

(B) Interest Rate

(C) Time

(D) All of the above

Question 11. If you invest $\textsf{₹}1,000$ at 10% per annum, after one year the accumulation will be the principal plus the interest. This demonstrates the concept of:

(A) Depreciation

(B) Taxation

(C) Accumulation

(D) Amortization

Question 12. Which of the following is NOT a basic concept in understanding interest and accumulation?

(A) Principal

(B) Discount Rate

(C) Time

(D) Amount

Question 13. A higher interest rate generally leads to:

(A) Lower accumulation over the same period

(B) Higher accumulation over the same period

(C) No change in accumulation

(D) Decrease in the principal

Question 14. What does 'P' usually represent in financial formulas related to interest?

(A) Periodic rate

(B) Payment

(C) Principal

(D) Period

Question 15. 'Amount' is the sum of which two components?

(A) Principal and Rate

(B) Interest and Time

(C) Principal and Time

(D) Principal and Interest

Question 16. If you borrow $\textsf{₹}5,000$ and have to pay back $\textsf{₹}5,500$ after a year, the interest paid is:

(A) $\textsf{₹}5,000$

(B) $\textsf{₹}5,500$

(C) $\textsf{₹}500$

(D) $\textsf{₹}10,500$

Question 17. The interest rate acts as a factor to calculate the return or cost based on the:

(A) Time period only

(B) Principal amount only

(C) Both the principal amount and the time period

(D) The final amount

Question 18. What happens to the accumulated amount as the time period increases, assuming a positive interest rate?

(A) It decreases

(B) It remains constant

(C) It increases

(D) It first decreases then increases

Question 19. If the principal is $\textsf{₹}10,000$, time is 2 years, and the amount is $\textsf{₹}12,000$, the interest earned is:

(A) $\textsf{₹}10,000$

(B) $\textsf{₹}12,000$

(C) $\textsf{₹}2,000$

(D) $\textsf{₹}22,000$

Question 20. Accumulation can be seen as the process of money growing due to the effect of:

(A) Inflation

(B) Taxation

(C) Interest

(D) Depreciation

Question 21. The term "per annum" when referring to interest rates means:

(A) Per month

(B) Per quarter

(C) Per year

(D) Per transaction

Question 22. If an investment of $\textsf{₹}5,000$ becomes $\textsf{₹}6,000$ over a period, the principal is:

(A) $\textsf{₹}6,000$

(B) $\textsf{₹}1,000$

(C) $\textsf{₹}5,000$

(D) $\textsf{₹}11,000$

Question 23. The interest rate is a crucial factor in determining:

(A) The initial principal amount

(B) The duration of the investment

(C) How quickly the money will accumulate

(D) Whether the principal is positive or negative

Question 24. Which of these factors represents the reward for lending money or the cost of borrowing it?

(A) Principal

(B) Amount

(C) Time

(D) Interest Rate

Question 25. The accumulation concept is fundamental to understanding:

(A) How the value of money decreases over time

(B) How the value of money increases over time due to interest

(C) Only the initial investment

(D) How much tax is paid on the investment

Question 1. The formula for calculating simple interest is:

(A) $I = P + R + T$

(B) $I = P \times R \times T$

(C) $I = \frac{P \times R}{T}$

(D) $I = \frac{P \times T}{R}$

Question 2. Calculate the simple interest on $\textsf{₹}8,000$ at 5% per annum for 3 years.

(A) $\textsf{₹}400$

(B) $\textsf{₹}1,200$

(C) $\textsf{₹}240$

(D) $\textsf{₹}8,400$

Question 3. If the principal is $\textsf{₹}15,000$, the simple interest rate is 6% per annum, and the time is 2 years, what is the simple interest?

(A) $\textsf{₹}900$

(B) $\textsf{₹}1,800$

(C) $\textsf{₹}18,000$

(D) $\textsf{₹}3,600$

Question 4. The formula for calculating the total amount (Principal + Simple Interest) is:

(A) $A = P \times I$

(B) $A = P + I$

(C) $A = I - P$

(D) $A = P / I$

Question 5. An investment of $\textsf{₹}10,000$ earns simple interest at 7% per annum. What is the total amount after 4 years?

(A) $\textsf{₹}2,800$

(B) $\textsf{₹}10,700$

(C) $\textsf{₹}12,800$

(D) $\textsf{₹}17,000$

Question 6. If the simple interest on $\textsf{₹}20,000$ for 2 years is $\textsf{₹}2,400$, what is the annual rate of interest?

(A) 6%

(B) 12%

(C) 24%

(D) 4.8%

Question 7. In simple interest, the interest is calculated only on the:

(A) Accumulated amount

(B) Interest earned in the previous period

(C) Original principal amount

(D) Interest rate

Question 8. How long will it take for $\textsf{₹}6,000$ to earn $\textsf{₹}900$ as simple interest at 5% per annum?

(A) 2 years

(B) 3 years

(C) 4 years

(D) 5 years

Question 9. What principal amount will yield $\textsf{₹}1,500$ simple interest in 5 years at 6% per annum?

(A) $\textsf{₹}30,000$

(B) $\textsf{₹}5,000$

(C) $\textsf{₹}4,500$

(D) $\textsf{₹}15,000$

Question 10. A sum of money doubles itself in 8 years at simple interest. What is the rate of interest per annum?

(A) 10%

(B) 12.5%

(C) 8%

(D) 25%

Question 11. What will be the simple interest on $\textsf{₹}25,000$ for 18 months at 8% per annum?

(A) $\textsf{₹}2,000$

(B) $\textsf{₹}3,000$

(C) $\textsf{₹}3,600$

(D) $\textsf{₹}1,500$

Question 12. The amount obtained by investing $\textsf{₹}30,000$ at a simple interest rate of 9% per annum for 4 years is:

(A) $\textsf{₹}10,800$

(B) $\textsf{₹}39,000$

(C) $\textsf{₹}40,800$

(D) $\textsf{₹}3,900$

Question 13. If the amount is $\textsf{₹}13,310$ and the principal is $\textsf{₹}12,100$ after 2 years at simple interest, what is the annual rate?

(A) 5%

(B) 10%

(C) 4%

(D) 9%

Question 14. Simple interest is calculated on the same principal amount:

(A) Every month

(B) Every year

(C) For the entire duration of the loan/investment

(D) On the accumulated amount

Question 15. Find the simple interest on $\textsf{₹}5,000$ at 10% per annum for 73 days.

(A) $\textsf{₹}100$

(B) $\textsf{₹}50$

(C) $\textsf{₹}200$

(D) $\textsf{₹}150$

Question 16. At what rate percent per annum simple interest will a sum of money triple itself in 16 years?

(A) 12.5%

(B) 15%

(C) 20%

(D) 6.25%

Question 17. A sum fetched a total simple interest of $\textsf{₹}4,000$ at the rate of 8% per annum in 5 years. What is the sum?

(A) $\textsf{₹}10,000$

(B) $\textsf{₹}15,000$

(C) $\textsf{₹}20,000$

(D) $\textsf{₹}12,000$

Question 18. The amount after 2 years on a principal of $\textsf{₹}9,000$ at 10% simple interest per annum is:

(A) $\textsf{₹}900$

(B) $\textsf{₹}1,800$

(C) $\textsf{₹}10,800$

(D) $\textsf{₹}9,900$

Question 19. If Simple Interest is $\textsf{₹}500$, Principal is $\textsf{₹}2,500$, and Rate is 5%, what is the Time?

(A) 2 years

(B) 3 years

(C) 4 years

(D) 5 years

Question 20. Simple interest on $\textsf{₹}7,200$ at 4% per annum for 8 months is:

(A) $\textsf{₹}288$

(B) $\textsf{₹}192$

(C) $\textsf{₹}230.40$

(D) $\textsf{₹}1,152$

Question 21. The simple interest on a certain sum for 2 years at 10% per annum is $\textsf{₹}1,000$. The principal is:

(A) $\textsf{₹}4,000$

(B) $\textsf{₹}5,000$

(C) $\textsf{₹}6,000$

(D) $\textsf{₹}10,000$

Question 22. If an investment earns $\textsf{₹}600$ simple interest in 3 years at 5% per annum, the principal invested was:

(A) $\textsf{₹}3,000$

(B) $\textsf{₹}4,000$

(C) $\textsf{₹}5,000$

(D) $\textsf{₹}6,000$

Question 23. A sum of $\textsf{₹}1,200$ was lent for 5 years at a certain rate of simple interest. The amount received back was $\textsf{₹}1,800$. What was the rate of interest?

(A) 8%

(B) 9%

(C) 10%

(D) 12%

Question 24. If the time period is given in months for simple interest calculation, you must:

(A) Multiply the months by 12

(B) Divide the months by 12

(C) Convert months to days

(D) Use the number of months directly

Question 25. The simple interest on $\textsf{₹}4,500$ at 6% per annum for the period from March 10, 2022 to May 21, 2022 is approximately:

(A) $\textsf{₹}45$

(B) $\textsf{₹}50$

(C) $\textsf{₹}55$

(D) $\textsf{₹}60$

Question 1. In compound interest, the interest earned in each period is added to the principal for the purpose of calculating interest in the next period. This concept is known as:

(A) Simple Interest

(B) Accumulation

(C) Compounding

(D) Discounting

Question 2. The formula for the amount ($A$) accumulated under compound interest with annual compounding is:

(A) $A = P(1 + r)^n$

(B) $A = P(1 + rn)$

(C) $A = P(1 + r/n)^n$

(D) $A = P + Prn$

Question 3. Calculate the amount if $\textsf{₹}10,000$ is invested at 10% per annum compound interest for 2 years (compounded annually).

(A) $\textsf{₹}12,000$

(B) $\textsf{₹}12,100$

(C) $\textsf{₹}11,000$

(D) $\textsf{₹}10,100$

Question 4. What is the compound interest earned on $\textsf{₹}5,000$ at 8% per annum for 3 years (compounded annually)?

(A) $\textsf{₹}1,200$

(B) $\textsf{₹}6,200$

(C) $\textsf{₹}1,298.56$

(D) $\textsf{₹}6,298.56$

Question 5. If the interest is compounded half-yearly, and the annual rate is $r$, the periodic rate for calculation is:

(A) $r$

(B) $r/2$

(C) $2r$

(D) $r/12$

Question 6. If the interest is compounded quarterly for a period of $n$ years at an annual rate $r$, the number of compounding periods will be:

(A) $n/4$

(B) $n$

(C) $4n$

(D) $12n$

Question 7. The formula for amount with compounding frequency $m$ times per year is:

(A) $A = P(1 + r)^n$

(B) $A = P(1 + r/m)^{n/m}$

(C) $A = P(1 + r/m)^{nm}$

(D) $A = P(1 + rm)^n$

Question 8. Calculate the amount if $\textsf{₹}20,000$ is invested at 6% per annum compounded half-yearly for 1 year.

(A) $\textsf{₹}21,200$

(B) $\textsf{₹}21,218$

(C) $\textsf{₹}20,600$

(D) $\textsf{₹}20,618$

Question 9. The compound interest on $\textsf{₹}10,000$ for 1 year at 10% per annum compounded quarterly is approximately:

(A) $\textsf{₹}1,000$

(B) $\textsf{₹}1,025$

(C) $\textsf{₹}1,038

(D) $\textsf{₹}1,045$

Question 10. Over a long period, compound interest yields more than simple interest on the same principal and rate because:

(A) The rate is higher in compound interest

(B) Interest is calculated on interest already earned

(C) The principal decreases over time

(D) Simple interest is calculated less frequently

Question 11. If $\textsf{₹} P$ is invested at $r$ % p.a. compounded annually, the compound interest (CI) for $n$ years is:

(A) $CI = P(1 + r)^n$

(B) $CI = P(1 + r)^n - P$

(C) $CI = P(1 + r)n$

(D) $CI = Prn$

Question 12. Find the amount on $\textsf{₹}16,000$ for 9 months at 20% per annum compounded quarterly.

(A) $\textsf{₹}17,200$

(B) $\textsf{₹}17,244

(C) $\textsf{₹}17,300$

(D) $\textsf{₹}17,344

Question 13. The difference between simple interest and compound interest on a sum of $\textsf{₹}5,000$ for 2 years at 10% per annum is:

(A) $\textsf{₹}50$

(B) $\textsf{₹}100$

(C) $\textsf{₹}150$

(D) $\textsf{₹}200$

Question 14. A sum of money amounts to $\textsf{₹}13,310$ in 3 years at 10% per annum compound interest. The principal is:

(A) $\textsf{₹}10,000$

(B) $\textsf{₹}11,000$

(C) $\textsf{₹}12,000$

(D) $\textsf{₹}9,000$

Question 15. At what rate percent per annum will $\textsf{₹}2,000$ amount to $\textsf{₹}2,420$ in 2 years, compounded annually?

(A) 5%

(B) 8%

(C) 10%

(D) 11%

Question 16. If a sum doubles itself at compound interest in 5 years, in how many years will it become eight times itself at the same rate?

(A) 10 years

(B) 15 years

(C) 20 years

(D) 25 years

Question 17. The compound interest on $\textsf{₹}8,000$ at 15% per annum for 2 years 4 months, compounded annually, is approximately:

(A) $\textsf{₹}3,109$

(B) $\textsf{₹}3,200$

(C) $\textsf{₹}3,300$

(D) $\textsf{₹}3,400$

Question 18. What is the rate of interest if $\textsf{₹}400$ compounded annually becomes $\textsf{₹}441$ in 2 years?

(A) 5%

(B) 10%

(C) 6%

(D) 8%

Question 19. If the annual rate is 12% and interest is compounded monthly, the periodic rate is:

(A) 12%

(B) 1%

(C) 2%

(D) 0.1%

Question 20. Compounding frequency refers to:

(A) The annual interest rate

(B) The number of times interest is calculated and added to the principal within one year

(C) The total number of years for the investment

(D) The initial principal amount

Question 21. The accumulated amount at the end of 1 year on $\textsf{₹}50,000$ at 10% p.a. compounded semi-annually is:

(A) $\textsf{₹}55,000$

(B) $\textsf{₹}55,125$

(C) $\textsf{₹}56,000$

(D) $\textsf{₹}56,250$

Question 22. For the same principal, rate, and time, which method of interest calculation yields a higher amount when the time period is greater than one year?

(A) Simple Interest

(B) Compound Interest

(C) Both yield the same amount

(D) It depends on the rate

Question 23. If interest is compounded continuously, the amount formula involves:

(A) $(1+r)^n$

(B) $e^{rn}$

(C) $(1+r/m)^{nm}$

(D) $rn$

Question 24. The time period for compounding should match the time period for the:

(A) Annual rate

(B) Principal amount

(C) Periodic rate

(D) Total investment time

Question 25. A bank offers 5% interest compounded annually. A customer deposits $\textsf{₹}20,000$. What is the amount in the account after 3 years?

(A) $\textsf{₹}23,000$

(B) $\textsf{₹}23,152.50$

(C) $\textsf{₹}22,000$

(D) $\textsf{₹}21,000$

Question 1. What does the concept of interest rate equivalency mean?

(A) Simple interest rate is always equal to the compound interest rate.

(B) Different interest rates or compounding frequencies can result in the same accumulated amount over a specific period.

(C) The nominal interest rate is always equal to the effective interest rate.

(D) All interest rates are the same when adjusted for inflation.

Question 2. A nominal interest rate is typically quoted on a(n) ________ basis, without considering the effect of compounding within the year.

(A) Periodic

(B) Effective

(C) Annual

(D) Accumulated

Question 3. The effective interest rate is the actual annual rate of return or cost that is earned or paid due to the effect of:

(A) Simple interest calculation

(B) Compounding frequency

(C) Principal amount

(D) Taxation

Question 4. The formula for the effective annual rate ($r_{eff}$) given a nominal rate ($r_{nom}$) compounded $m$ times per year is:

(A) $r_{eff} = (1 + r_{nom}/m)^{nm} - 1$

(B) $r_{eff} = (1 + r_{nom})^m - 1$

(C) $r_{eff} = (1 + r_{nom}/m)^m - 1$

(D) $r_{eff} = r_{nom} / m$

Question 5. If the nominal interest rate is 12% compounded monthly, what is the effective annual rate?

(A) 12%

(B) 12.68%

(C) 13%

(D) 12.36%

Question 6. An investment offers 8% per annum compounded quarterly. The effective annual rate is approximately:

(A) 8%

(B) 8.16%

(C) 8.24%

(D) 8.32%

Question 7. When is the nominal rate equal to the effective rate?

(A) When the principal amount is very large

(B) When the compounding frequency is annual ($m=1$)

(C) When the interest rate is very low

(D) When the time period is less than one year

Question 8. Why is the effective rate important for consumers comparing loan offers?

(A) It tells them the simple interest rate.

(B) It shows the true annual cost after accounting for compounding.

(C) It helps them calculate the principal amount.

(D) It indicates the repayment period.

Question 9. Bank A offers 9% p.a. simple interest. Bank B offers 8.8% p.a. compounded semi-annually. For an investment horizon of 1 year, which bank offers a better return?

(A) Bank A

(B) Bank B

(C) Both are equivalent

(D) Cannot be determined

Question 10. The effective annual rate for a nominal rate of 6% per annum compounded monthly is approximately:

(A) 6.00%

(B) 6.08%

(C) 6.14%

(D) 6.17%

Question 11. If the compounding frequency increases (e.g., from semi-annual to quarterly), what generally happens to the effective annual rate, assuming a positive nominal rate?

(A) It decreases

(B) It remains the same

(C) It increases

(D) It depends on the principal

Question 12. Which interest rate is a better indicator of the actual cost of borrowing or return on investment?

(A) Nominal Rate

(B) Periodic Rate

(C) Simple Interest Rate

(D) Effective Rate

Question 13. An effective rate of 5% means that $\textsf{₹}100$ invested for one year will grow to:

(A) $\textsf{₹}100.05$

(B) $\textsf{₹}105.00$

(C) $\textsf{₹}100.50$

(D) $\textsf{₹}100.00$

Question 14. If an investment earns a nominal rate of 7% compounded daily, the effective annual rate will be:

(A) Exactly 7%

(B) Slightly less than 7%

(C) Significantly less than 7%

(D) More than 7%

Question 15. To compare an investment offering 10% compounded quarterly with another offering a simple interest rate, you would calculate the _______ of the first investment.

(A) Nominal Rate

(B) Periodic Rate

(C) Effective Rate

(D) Accumulation

Question 16. A loan is advertised at a nominal rate of 18% per annum. If interest is compounded monthly, the effective rate will be:

(A) Less than 18%

(B) Equal to 18%

(C) More than 18%

(D) Zero

Question 17. What is the effective annual rate corresponding to a nominal rate of 4% per annum compounded semi-annually?

(A) 4.00%

(B) 4.02%

(C) 4.04%

(D) 4.08%

Question 18. The relationship between simple and compound interest rates is that for periods longer than one year, compound interest accumulation is generally higher due to:

(A) Lower principal

(B) Constant interest calculation

(C) Interest on interest

(D) Shorter time periods

Question 19. If Bank A offers 5% compounded annually and Bank B offers 4.9% compounded quarterly, which offers a better effective rate?

(A) Bank A

(B) Bank B

(C) Both are the same

(D) Cannot be determined without principal

Question 20. The effective rate provides a standardized way to compare investment or loan options with different:

(A) Principal amounts

(B) Nominal rates and compounding frequencies

(C) Time periods

(D) Types of interest (simple vs. compound)

Question 1. The concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity is known as:

(A) Inflation

(B) Present Value

(C) Future Value

(D) Time Value of Money

Question 2. What is the present value (PV) of $\textsf{₹}10,000$ received in 5 years, assuming a discount rate of 8% per annum?

(A) $\textsf{₹}6,806$

(B) $\textsf{₹}7,350$

(C) $\textsf{₹}14,693$

(D) $\textsf{₹}7,000$

Question 3. Future Value (FV) is the value of an investment or cash flow at a specified date in the future, assuming a certain:

(A) Principal amount

(B) Simple interest rate

(C) Interest rate or rate of return

(D) Present value of money

Question 4. If you invest $\textsf{₹}5,000$ today at an interest rate of 7% compounded annually, what will be its future value after 4 years?

(A) $\textsf{₹}5,350$

(B) $\textsf{₹}6,435$

(C) $\textsf{₹}6,554$

(D) $\textsf{₹}6,801$

Question 5. The relationship between Present Value (PV) and Future Value (FV) can be expressed as:

(A) $FV = PV + Interest$

(B) $PV = FV \times (1 + r)^n$

(C) $FV = PV / (1 + r)^n$

(D) $FV = PV \times (1 + r)^n$

Question 6. What is Net Present Value (NPV)?

(A) The future value of all cash flows from an investment.

(B) The sum of the present values of all cash inflows minus the present value of all cash outflows associated with an investment.

(C) The total interest earned on an investment.

(D) The initial investment amount.

Question 7. According to the NPV decision rule, an investment project is generally acceptable if its NPV is:

(A) Negative

(B) Zero

(C) Positive

(D) Equal to the initial investment

Question 8. You are considering an investment that requires an initial outlay of $\textsf{₹}10,000$ and is expected to generate a single cash inflow of $\textsf{₹}12,000$ in 2 years. If the discount rate is 9% per annum, the NPV of this investment is approximately:

(A) $\textsf{₹}2,000$

(B) $\textsf{₹}1,000$

(C) $\textsf{₹}8$

(D) $-\textsf{₹}8$

Question 9. Calculating the present value of future cash flows is also known as:

(A) Compounding

(B) Accumulating

(C) Discounting

(D) Inflating

Question 10. If you want to have $\textsf{₹}50,000$ in your bank account in 3 years and the bank pays 6% interest compounded annually, how much should you deposit today?

(A) $\textsf{₹}41,981$

(B) $\textsf{₹}42,000$

(C) $\textsf{₹}44,150$

(D) $\textsf{₹}47,000$

Question 11. Which of the following is a common application of Present Value calculation?

(A) Calculating the interest on a simple loan

(B) Valuing future income streams like lottery winnings or pension payments

(C) Determining the annual depreciation of an asset

(D) Calculating Goods and Service Tax (GST)

Question 12. Which of the following is a common application of Future Value calculation?

(A) Estimating the current value of an investment

(B) Comparing different loan offers

(C) Projecting the growth of savings over time

(D) Determining the initial principal of a loan

Question 13. If the NPV of a project is positive, it indicates that:

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

(D) The project is not profitable.

Question 14. A higher discount rate results in a ________ present value for a given future cash flow.

(A) Higher

(B) Lower

(C) Unchanged

(D) Negative

Question 15. What is the future value of $\textsf{₹}1,000$ invested annually for 3 years at 10% per annum? Assume the investment is made at the end of each year (ordinary annuity).

(A) $\textsf{₹}3,000$

(B) $\textsf{₹}3,300$

(C) $\textsf{₹}3,310$

(D) $\textsf{₹}3,641$

Question 16. Calculating the price one should be willing to pay today for a bond that promises future interest payments and principal repayment is an application of:

(A) Future Value

(B) Simple Interest

(C) Present Value

(D) Compound Annual Growth Rate

Question 17. If the PV of a cash inflow equals its FV, the interest rate must be:

(A) Positive

(B) Negative

(C) Zero

(D) Very high

Question 18. A capital budgeting decision whether to invest in a new project can be made using:

(A) Simple Interest Calculation

(B) Depreciation Calculation

(C) Net Present Value (NPV)

(D) Effective Interest Rate

Question 19. Which value is always smaller than Future Value for a positive interest rate and time period greater than zero?

(A) Nominal Value

(B) Book Value

(C) Present Value

(D) Salvage Value

Question 20. If a project has an NPV of $\textsf{₹}0$, it means:

(A) The project is highly profitable.

(B) The project will just cover its costs, including the required rate of return.

(C) The project will lose money.

(D) The project has no initial cost.

Question 1. What is an annuity?

(A) A single lump sum payment.

(B) A series of equal payments made at fixed intervals of time.

(C) Interest earned on an investment.

(D) The total amount accumulated after a certain period.

Question 2. An ordinary annuity (or regular annuity) is one where payments are made:

(A) At the beginning of each period.

(B) At the end of each period.

(C) Irregularly over time.

(D) Only once at the start.

Question 3. An annuity due is one where payments are made:

(A) At the beginning of each period.

(B) At the end of each period.

(C) Only at the end of the last period.

(D) Only at the beginning of the first period.

Question 4. Which type of annuity payment occurs at the same time interest is typically calculated?

(A) Ordinary Annuity

(B) Annuity Due

(C) Perpetuity

(D) Both Ordinary Annuity and Annuity Due

Question 5. The Future Value (FV) of an ordinary annuity of $Pmt$ per period for $n$ periods at interest rate $i$ per period is given by:

(A) $FV = Pmt \times \left[ \frac{(1+i)^n - 1}{i} \right]$

(B) $FV = Pmt \times \left[ \frac{(1+i)^n - 1}{i} \right] \times (1+i)$

(C) $FV = Pmt \times \left[ \frac{1 - (1+i)^{-n}}{i} \right]$

(D) $FV = Pmt \times (1+i)^n$

Question 6. The Present Value (PV) of an ordinary annuity of $Pmt$ per period for $n$ periods at interest rate $i$ per period is given by:

(A) $PV = Pmt \times \left[ \frac{(1+i)^n - 1}{i} \right]$

(B) $PV = Pmt \times \left[ \frac{(1+i)^n - 1}{i} \right] \times (1+i)$

(C) $PV = Pmt \times \left[ \frac{1 - (1+i)^{-n}}{i} \right]$

(D) $PV = Pmt \times (1+i)^n$

Question 7. You deposit $\textsf{₹}1,000$ at the end of each year for 5 years into an account paying 7% per annum compound interest. What is the Future Value of this ordinary annuity?

(A) $\textsf{₹}5,000$

(B) $\textsf{₹}5,350$

(C) $\textsf{₹}5,708$

(D) $\textsf{₹}6,015$

Question 8. What is the present value of receiving $\textsf{₹}500$ at the end of each year for 4 years, assuming a discount rate of 6% per annum?

(A) $\textsf{₹}1,732.55$

(B) $\textsf{₹}1,833.40$

(C) $\textsf{₹}2,000.00$

(D) $\textsf{₹}2,120.00$

Question 9. Calculating the loan amount you can afford based on your fixed monthly repayment capacity is an application of:

(A) Future Value of Annuity

(B) Present Value of Annuity

(C) Simple Interest

(D) Sinking Fund calculation

Question 10. Calculating the required savings amount per period to reach a specific financial goal in the future is an application of:

(A) Present Value of Annuity

(B) Future Value of Annuity

(C) Perpetuity Calculation

(D) EMI Calculation

Question 11. For the same number of payments and interest rate, the future value of an annuity due will be ________ the future value of an ordinary annuity.

(A) Less than

(B) Equal to

(C) Greater than

(D) Unrelated to

Question 12. Which of the following is an example of an ordinary annuity from the perspective of the recipient?

(A) Rent payment made at the start of the month

(B) Pension payments received at the end of each month

(C) Insurance premium paid at the beginning of the year

(D) Salary received at the beginning of the month

Question 13. If the interest rate is 0%, the future value of an ordinary annuity of $\textsf{₹}100$ per year for 5 years is:

(A) $\textsf{₹}100$

(B) $\textsf{₹}500$

(C) $\textsf{₹}550$

(D) $\textsf{₹}600$

Question 14. If the interest rate is 0%, the present value of an ordinary annuity of $\textsf{₹}100$ per year for 5 years is:

(A) $\textsf{₹}100$

(B) $\textsf{₹}500$

(C) $\textsf{₹}550$

(D) $\textsf{₹}600$

Question 15. The value of an annuity is dependent on the payment amount, interest rate, number of periods, and:

(A) The principal amount

(B) The compounding frequency

(C) Whether payments occur at the beginning or end of the period

(D) The rate of inflation

Question 16. You want to accumulate $\textsf{₹}10,000$ in 3 years by making equal annual deposits at the end of each year into an account paying 8% interest. What is the required annual deposit?

(A) $\textsf{₹}3,000$

(B) $\textsf{₹}3,080$

(C) $\textsf{₹}3,151.47$

(D) $\textsf{₹}3,333.33$

Question 17. What is the present value of an ordinary annuity that pays $\textsf{₹}2,000$ semi-annually for 5 years at a nominal rate of 10% compounded semi-annually?

(A) $\textsf{₹}15,444.60$

(B) $\textsf{₹}15,000.00$

(C) $\textsf{₹}7,722.30$

(D) $\textsf{₹}16,288.90$

Question 18. The factor $\left[ \frac{(1+i)^n - 1}{i} \right]$ in the Future Value of Ordinary Annuity formula is known as the:

(A) Present Value Interest Factor (PVIF)

(B) Future Value Interest Factor (FVIF)

(C) Present Value Interest Factor of Annuity (PVIFA)

(D) Future Value Interest Factor of Annuity (FVIFA)

Question 19. You win a prize that pays you $\textsf{₹}1,000$ at the end of each year for 10 years. If the interest rate is 5% per annum, the value of this prize today is the:

(A) Future Value of an Ordinary Annuity

(B) Present Value of an Ordinary Annuity

(C) Future Value of an Annuity Due

(D) Present Value of an Annuity Due

Question 20. If payments are made at the beginning of each period, the annuity is called:

(A) Regular Annuity

(B) Ordinary Annuity

(C) Annuity Due

(D) Deferred Annuity

Question 1. What is a perpetuity?

(A) An annuity that lasts for a fixed number of years.

(B) A single payment made today.

(C) A series of equal payments that continue forever.

(D) A payment made at the beginning of each period.

Question 2. The formula for the Present Value (PV) of a perpetuity with payment $Pmt$ per period and interest rate $i$ per period is:

(A) $PV = Pmt \times i$

(B) $PV = Pmt / i$

(C) $PV = Pmt \times (1+i)$

(D) $PV = Pmt / (1+i)$

Question 3. If you want to receive $\textsf{₹}500$ every year forever, starting one year from now, and the interest rate is 10% per annum, how much must you invest today?

(A) $\textsf{₹}500$

(B) $\textsf{₹}5,000$

(C) $\textsf{₹}5,500$

(D) $\textsf{₹}50,000$

Question 4. What is a sinking fund?

(A) A fund used to pay dividends to shareholders.

(B) A fund created by setting aside money regularly to accumulate a specific future sum for a particular purpose (like repaying debt or replacing an asset).

(C) A fund used for paying salaries.

(D) A fund for emergency expenses.

Question 5. The purpose of a sinking fund is typically to meet a future:

(A) Expense

(B) Liability or financial obligation

(C) Revenue stream

(D) Profit target

Question 6. To calculate the periodic contribution required for a sinking fund, you essentially need to find the periodic payment of a(n):

(A) Present Value of Annuity

(B) Future Value of Annuity

(C) Perpetuity

(D) Simple Interest loan

Question 7. A company needs to accumulate $\textsf{₹}50,000$ in 5 years for replacing machinery. It sets up a sinking fund that earns 8% interest compounded annually. What annual contribution (at the end of each year) is required?

(A) $\textsf{₹}10,000$

(B) $\textsf{₹}8,522.82$

(C) $\textsf{₹}7,250.40$

(D) $\textsf{₹}11,000$

Question 8. What is the present value of a perpetuity that pays $\textsf{₹}1,000$ monthly, starting next month, if the annual interest rate is 12% compounded monthly?

(A) $\textsf{₹}12,000$

(B) $\textsf{₹}100,000$

(C) $\textsf{₹}1,000,000$

(D) $\textsf{₹}83,333.33$

Question 9. If a bond promises to pay $\textsf{₹}100$ coupon forever, and the required rate of return is 5%, the fair value of this bond (treating coupons as a perpetuity) is:

(A) $\textsf{₹}100$

(B) $\textsf{₹}200$

(C) $\textsf{₹}1,000$

(D) $\textsf{₹}2,000$

Question 10. A sinking fund calculation aims to find the periodic payment ($Pmt$) such that the future value of these payments equals the target amount ($FV_{target}$). The formula used is a rearrangement of the FV of annuity formula, often written as:

(A) $Pmt = FV_{target} \times \left[ \frac{(1+i)^n - 1}{i} \right]$

(B) $Pmt = FV_{target} \times \left[ \frac{i}{(1+i)^n - 1} \right]$

(C) $Pmt = FV_{target} \times i$

(D) $Pmt = FV_{target} / (1+i)^n$

Question 11. A perpetuity payment usually starts:

(A) Immediately (at the start of the first period)

(B) At the end of the first period

(C) After several periods of deferral

(D) Only once

Question 12. The present value of a perpetuity is highly sensitive to changes in the:

(A) Payment amount

(B) Number of periods

(C) Interest rate

(D) Initial principal

Question 13. If the interest rate increases, the present value of a perpetuity will:

(A) Increase

(B) Decrease

(C) Remain the same

(D) Become infinite

Question 14. A city government issues bonds that promise to pay $\textsf{₹}1,000$ interest perpetually. If the market interest rate is 8%, the theoretical price of such a perpetual bond is:

(A) $\textsf{₹}8,000$

(B) $\textsf{₹}10,000$

(C) $\textsf{₹}12,500$

(D) $\textsf{₹}15,000$

Question 15. A sinking fund is used to accumulate a fund *for* a future liability, whereas loan amortization is about paying back a loan *from* current income/assets through instalments. This highlights a key difference in their:

(A) Calculation formulas

(B) Time horizons

(C) Purpose and cash flow direction

(D) Applicable interest rates

Question 16. Which financial concept allows for a stream of payments to continue indefinitely?

(A) Ordinary Annuity

(B) Sinking Fund

(C) Perpetuity

(D) EMI

Question 17. If the required periodic payment into a sinking fund is calculated to be $\textsf{₹}X$, and the interest rate increases, the required payment for the same future value will:

(A) Increase

(B) Decrease

(C) Remain the same

(D) Double

Question 18. A company issues debt that requires setting up a sinking fund. This helps assure bondholders that the company can:

(A) Pay periodic interest

(B) Repay the principal amount at maturity

(C) Increase sales revenue

(D) Reduce operating costs

Question 19. If a preferred stock pays a constant dividend forever, its theoretical value can be calculated using the concept of a:

(A) Sinking Fund

(B) Ordinary Annuity

(C) Annuity Due

(D) Perpetuity

Question 20. Which concept deals with accumulating a lump sum in the future by making periodic payments?

(A) Perpetuity

(B) Present Value of Annuity

(C) Sinking Fund

(D) Simple Interest

Question 1. A loan is a financial arrangement where a lender gives money to a borrower, who agrees to repay the amount (principal) plus ________ over a specified period.

(A) Fees

(B) Interest

(C) Taxes

(D) Depreciation

Question 2. What does EMI stand for?

(A) Equal Monthly Income

(B) Equated Monthly Installment

(C) Effective Monthly Interest

(D) Estimated Monthly Investment

Question 3. An EMI consists of two main components: the repayment of the principal amount and the payment of:

(A) Fees

(B) Taxes

(C) Interest

(D) Insurance

Question 4. The principal component of the EMI ________ over the loan tenure, while the interest component ________.

(A) Increases, Increases

(B) Decreases, Decreases

(C) Increases, Decreases

(D) Decreases, Increases

Question 5. The calculation of EMI is based on the concept of the present value of a(n):

(A) Single future sum

(B) Perpetuity

(C) Annuity

(D) Simple Interest

Question 6. You take a loan of $\textsf{₹}1,00,000$ at an interest rate of 12% per annum, compounded monthly, for a tenure of 12 months. What is the monthly interest rate used in the EMI calculation?

(A) 12%

(B) 1%

(C) 0.12%

(D) 1.2%

Question 7. For the loan in the previous question ($\textsf{₹}1,00,000$ at 12% p.a. compounded monthly for 12 months), what is the number of periods ($n$) for the EMI calculation?

(A) 1

(B) 12

(C) 120

(D) 144

Question 8. The formula for EMI (M) for a principal loan amount (P) at a monthly interest rate (r) over n months is:

(A) $M = P \times r \times n$

(B) $M = P \times \frac{r(1+r)^n}{(1+r)^n - 1}$

(C) $M = P \times \frac{(1+r)^n - 1}{r(1+r)^n}$

(D) $M = P(1+r)^n$

Question 9. You borrow $\textsf{₹}5,00,000$ for a home loan at 9% per annum compounded monthly for 20 years. The monthly interest rate is:

(A) 0.75%

(B) 9%

(C) 0.09%

(D) 0.9%

Question 10. For the home loan in the previous question ($\textsf{₹}5,00,000$ at 9% p.a. compounded monthly for 20 years), the total number of months ($n$) is:

(A) 20

(B) 9

(C) 240

(D) 180

Question 11. A higher interest rate on a loan, keeping principal and tenure same, will result in a ________ EMI.

(A) Lower

(B) Higher

(C) Unchanged

(D) Zero

Question 12. A longer loan tenure, keeping principal and interest rate same, will result in a ________ EMI.

(A) Lower

(B) Higher

(C) Unchanged

(D) Infinite

Question 13. An amortization schedule shows how each EMI payment is split between:

(A) Principal and Interest

(B) Fees and Taxes

(C) Opening Balance and Closing Balance

(D) All of the above

Question 14. In the initial EMIs of a loan, the proportion of interest component is typically ________ the proportion of principal component.

(A) Less than

(B) Equal to

(C) Greater than

(D) Zero compared to

Question 15. As a loan approaches maturity, the principal component of the EMI ________, and the interest component ________.

(A) Decreases, Increases

(B) Increases, Decreases

(C) Decreases, Decreases

(D) Increases, Increases

Question 16. You borrow $\textsf{₹}2,00,000$ at 15% per annum compounded monthly for 2 years. The monthly interest rate is:

(A) 1.5%

(B) 1.25%

(C) 15%

(D) 0.15%

Question 17. For the loan in the previous question ($\textsf{₹}2,00,000$ at 15% p.a. compounded monthly for 2 years), the number of periods ($n$) is:

(A) 2

(B) 15

(C) 24

(D) 30

Question 18. If you calculate EMI based on an annual rate, you must first convert it to the ________ rate based on the EMI frequency.

(A) Simple

(B) Effective

(C) Periodic

(D) Nominal

Question 19. The total amount paid over the tenure of a loan (excluding any foreclosure charges) is the sum of the total principal repaid and the total:

(A) Fees

(B) Taxes

(C) Interest paid

(D) EMI received

Question 20. A borrower takes a loan of $\textsf{₹}3,00,000$. The total amount paid back as EMIs is $\textsf{₹}3,60,000$. The total interest paid is:

(A) $\textsf{₹}3,00,000$

(B) $\textsf{₹}3,60,000$

(C) $\textsf{₹}60,000$

(D) $\textsf{₹}6,60,000$

Question 1. Absolute return measures the gain or loss on an investment over a period as a:

(A) Percentage

(B) Rate per annum

(C) Simple numerical value (gain or loss)

(D) Compound value

Question 2. Percentage return expresses the gain or loss on an investment relative to the initial investment amount, usually over a specific period. The formula is often given as:

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

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

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

(D) $\text{Final Value} / \text{Initial Value}$

Question 3. You invest $\textsf{₹}5,000$ in a stock. After one year, the value of the investment is $\textsf{₹}5,500$. The absolute return is:

(A) $\textsf{₹}5,000$

(B) $\textsf{₹}5,500$

(C) $\textsf{₹}500$

(D) 10%

Question 4. For the investment in the previous question ($\textsf{₹}5,000$ grew to $\textsf{₹}5,500$ in one year), the percentage return is:

(A) 5%

(B) 10%

(C) 110%

(D) 50%

Question 5. The nominal rate of return is the stated or quoted rate of return on an investment before considering the effects of:

(A) Compounding

(B) Taxes and inflation

(C) Principal amount

(D) Time period

Question 6. CAGR stands for:

(A) Compound Absolute Growth Rate

(B) Cumulative Annual Growth Ratio

(C) Compound Annual Growth Rate

(D) Cumulative Asset Growth Return

Question 7. CAGR provides a smoothed annual growth rate over a period, assuming that the investment grew at a constant rate each year. It is particularly useful for comparing investments with different:

(A) Initial values

(B) Final values

(C) Volatility

(D) Investment durations

Question 8. The formula for CAGR is: $(\text{End Value} / \text{Start Value})^{1/n} - 1$, where $n$ is the number of:

(A) Months

(B) Quarters

(C) Compounding periods

(D) Years

Question 9. An investment grew from $\textsf{₹}10,000$ to $\textsf{₹}14,641$ over 4 years. What is the CAGR?

(A) 10%

(B) 11%

(C) 12%

(D) 14.64%

Question 10. CAGR helps in understanding the ________ growth rate, unlike the simple average growth rate which can be misleading with fluctuating returns.

(A) Maximum

(B) Minimum

(C) Geometric (Compounded)

(D) Arithmetic (Simple)

Question 11. An investment valued at $\textsf{₹}20,000$ in 2018 is valued at $\textsf{₹}30,000$ in 2023. The number of years for calculating CAGR is:

(A) 4

(B) 5

(C) 6

(D) 2023

Question 12. If the CAGR is 0%, it means the investment's value:

(A) Increased significantly

(B) Decreased significantly

(C) Remained the same over the period

(D) Earned simple interest only

Question 13. A negative CAGR indicates that the investment value:

(A) Increased over the period

(B) Decreased over the period

(C) Stayed constant

(D) Earned simple interest

Question 14. CAGR is particularly useful for comparing the performance of investments that have:

(A) Had consistent annual returns

(B) Had fluctuating returns over multiple periods

(C) Just one year of history

(D) Earned only simple interest

Question 15. If an investment doubles in value over 5 years, the CAGR is approximately:

(A) 20%

(B) 14.87%

(C) 100%

(D) 200%

Question 16. An investment was $\textsf{₹}1,00,000$ in 2020 and $\textsf{₹}1,33,100$ in 2023. The number of years is 3. The CAGR is:

(A) 10%

(B) 11%

(C) 33.1%

(D) 30%

Question 17. CAGR does NOT account for:

(A) Starting Value

(B) Ending Value

(C) Time Period

(D) Volatility of returns within the period

Question 18. If an investment increases by 10% in year 1 and decreases by 5% in year 2, the simple average return is 2.5%. The CAGR for these two years will be:

(A) Greater than 2.5%

(B) Equal to 2.5%

(C) Less than 2.5%

(D) Negative

Question 19. CAGR is a measure of growth rate that assumes ________ over the investment period.

(A) Simple interest

(B) Linear growth

(C) Compounded growth

(D) Variable returns

Question 20. To calculate the absolute return, you need:

(A) Starting value only

(B) Ending value only

(C) Both starting and ending values

(D) The time period

Question 1. Depreciation refers to the systematic allocation of the cost of an asset over its useful life. What is the primary reason for depreciation?

(A) The asset increases in value over time.

(B) To account for the wearing out, obsolescence, or usage of the asset.

(C) To calculate the market value of the asset.

(D) To determine the insurance value of the asset.

Question 2. The Straight-Line Method of depreciation assumes that an asset loses its value:

(A) Faster in the initial years and slower later.

(B) At a constant rate over its useful life.

(C) Slower in the initial years and faster later.

(D) Based on usage rather than time.

Question 3. The formula for annual depreciation using the Straight-Line Method is:

(A) $(\text{Cost of Asset} + \text{Salvage Value}) / \text{Useful Life}$

(B) $\text{Cost of Asset} / \text{Useful Life}$

(C) $(\text{Cost of Asset} - \text{Salvage Value}) / \text{Useful Life}$

(D) $(\text{Salvage Value} - \text{Cost of Asset}) / \text{Useful Life}$

Question 4. The estimated residual value of an asset at the end of its useful life is called its:

(A) Market Value

(B) Book Value

(C) Salvage Value

(D) Replacement Value

Question 5. A machine is purchased for $\textsf{₹}5,00,000$. Its useful life is estimated to be 10 years, and its salvage value is $\textsf{₹}50,000$. What is the annual depreciation using the Straight-Line Method?

(A) $\textsf{₹}50,000$

(B) $\textsf{₹}45,000$

(C) $\textsf{₹}5,000$

(D) $\textsf{₹}55,000$

Question 6. Using the data from the previous question (Asset Cost $\textsf{₹}5,00,000$, Salvage Value $\textsf{₹}50,000$, Useful Life 10 years, Straight-Line Method), what is the book value of the machine at the end of Year 3?

(A) $\textsf{₹}1,35,000$

(B) $\textsf{₹}3,65,000$

(C) $\textsf{₹}4,55,000$

(D) $\textsf{₹}50,000$

Question 7. Book value of an asset is its cost minus accumulated ________.

(A) Interest

(B) Taxes

(C) Depreciation

(D) Salvage Value

Question 8. Accumulated depreciation is the total depreciation charged on an asset from the time it was placed in service up to a specific date. Using the data from Question 5, what is the accumulated depreciation at the end of Year 5?

(A) $\textsf{₹}45,000$

(B) $\textsf{₹}2,25,000$

(C) $\textsf{₹}2,50,000$

(D) $\textsf{₹}50,000$

Question 9. The depreciable amount of an asset is the difference between its cost and its:

(A) Book Value

(B) Market Value

(C) Salvage Value

(D) Accumulated Depreciation

Question 10. A vehicle was purchased for $\textsf{₹}12,00,000$. After 5 years, it is expected to have a salvage value of $\textsf{₹}2,00,000$. What is the annual depreciation using the Straight-Line Method?

(A) $\textsf{₹}2,40,000$

(B) $\textsf{₹}2,00,000$

(C) $\textsf{₹}2,80,000$

(D) $\textsf{₹}1,00,000$

Question 11. Using the data from the previous question (Vehicle Cost $\textsf{₹}12,00,000$, Salvage Value $\textsf{₹}2,00,000$, Useful Life 5 years, Straight-Line Method), what is the book value of the vehicle at the end of Year 4?

(A) $\textsf{₹}2,00,000$

(B) $\textsf{₹}4,00,000$

(C) $\textsf{₹}8,00,000$

(D) $\textsf{₹}10,00,000$

Question 12. Depreciation is a non-cash expense. It impacts the company's net income by reducing:

(A) Revenue

(B) Cost of Goods Sold

(C) Taxable Income

(D) Cash Flow

Question 13. Which factor is NOT needed to calculate annual depreciation using the Straight-Line Method?

(A) Original Cost

(B) Useful Life

(C) Salvage Value

(D) Market Value at the end of each year

Question 14. The book value of an asset should ideally equal its salvage value at the:

(A) Beginning of its useful life

(B) End of its useful life

(C) Middle of its useful life

(D) Time of purchase

Question 15. A company buys furniture for $\textsf{₹}80,000$ with an estimated useful life of 8 years and no salvage value. What is the annual depreciation?

(A) $\textsf{₹}8,000$

(B) $\textsf{₹}10,000$

(C) $\textsf{₹}1,000$

(D) $\textsf{₹}80,000$

Question 16. Using the data from the previous question (Furniture Cost $\textsf{₹}80,000$, Useful Life 8 years, Salvage Value $\textsf{₹}0$, Straight-Line Method), what is the book value after 5 years?

(A) $\textsf{₹}30,000$

(B) $\textsf{₹}40,000$

(C) $\textsf{₹}50,000$

(D) $\textsf{₹}0$

Question 17. If an asset's book value is equal to its salvage value, it means the asset is:

(A) At the beginning of its useful life.

(B) At the end of its useful life.

(C) Fully depreciated.

(D) Both (B) and (C)

Question 18. The straight-line method is considered the simplest method of depreciation because it charges the depreciation expense:

(A) Based on actual usage

(B) As a fixed percentage of the declining balance

(C) Equally each year

(D) Faster in the early years

Question 19. A computer is bought for $\textsf{₹}60,000$. Its useful life is 4 years, and salvage value is $\textsf{₹}4,000$. The annual depreciation is:

(A) $\textsf{₹}15,000$

(B) $\textsf{₹}14,000$

(C) $\textsf{₹}12,000$

(D) $\textsf{₹}11,500$

Question 20. Using the data from the previous question (Computer Cost $\textsf{₹}60,000$, Salvage Value $\textsf{₹}4,000$, Useful Life 4 years, Straight-Line Method), what is the book value at the end of year 1?

(A) $\textsf{₹}60,000$

(B) $\textsf{₹}56,000$

(C) $\textsf{₹}46,000$

(D) $\textsf{₹}49,000$

Question 1. What is a Tax?

(A) A voluntary payment made to the government.

(B) A compulsory financial charge imposed by the government on income, goods, or services.

(C) A fee paid for specific government services.

(D) A donation to a charity.

Question 2. Which of the following is an example of a Direct Tax in India?

(A) Goods and Service Tax (GST)

(B) Value Added Tax (VAT)

(C) Excise Duty

(D) Income Tax

Question 3. Goods and Service Tax (GST) is an example of a(n):

(A) Direct Tax

(B) Indirect Tax

(C) Property Tax

(D) Corporate Tax

Question 4. Taxable Income is the portion of your gross income that is:

(A) Exempt from tax.

(B) Subject to income tax after allowing for deductions and exemptions.

(C) Your total income before any deductions.

(D) Only income from salary.

Question 5. Tax Slabs define:

(A) The total amount of tax paid by an individual.

(B) The different rates of income tax applicable to different income ranges.

(C) The types of income that are taxable.

(D) The deductions allowed from gross income.

Question 6. If the tax slabs are 0% for income up to $\textsf{₹}2.5$ Lakh and 5% for income between $\textsf{₹}2.5$ Lakh and $\textsf{₹}5$ Lakh, how much income tax would a person with a taxable income of $\textsf{₹}4,00,000$ pay (ignoring cess/surcharge)?

(A) $\textsf{₹}7,500$

(B) $\textsf{₹}12,500$

(C) $\textsf{₹}20,000$

(D) $\textsf{₹}0$

Question 7. GST is levied on the ________ of goods and services.

(A) Production

(B) Consumption

(C) Export

(D) Import only

Question 8. If a product costs $\textsf{₹}1,000$ and the GST rate is 18%, the total price including GST will be:

(A) $\textsf{₹}1,018$

(B) $\textsf{₹}1,180$

(C) $\textsf{₹}1,800$

(D) $\textsf{₹}1,000$

Question 9. Input Tax Credit (ITC) in GST allows businesses to:

(A) Pay less tax on their income.

(B) Claim credit for taxes paid on inputs used for business activities against their output tax liability.

(C) Get a refund of all taxes paid.

(D) Avoid paying any tax.

Question 10. If you have a taxable income of $\textsf{₹}7,00,000$ and the tax slabs are: 0-2.5 Lakh (0%), 2.5-5 Lakh (5%), 5-10 Lakh (20%), how much income tax would you pay (ignoring cess/surcharge)?

(A) $\textsf{₹}12,500$

(B) $\textsf{₹}40,000$

(C) $\textsf{₹}52,500$

(D) $\textsf{₹}1,40,000$

Question 11. If a service costs $\textsf{₹}5,000$ before GST, and the GST rate is 12%, the GST amount is:

(A) $\textsf{₹}500$

(B) $\textsf{₹}600$

(C) $\textsf{₹}1,200$

(D) $\textsf{₹}5,600$

Question 12. A progressive tax system is one where the tax rate:

(A) Decreases as income increases.

(B) Remains constant regardless of income.

(C) Increases as income increases.

(D) Applies only to goods and services.

Question 13. Income tax in India is generally considered a ________ tax.

(A) Regressive

(B) Proportional

(C) Progressive

(D) Indirect

Question 14. If the GST rate on a product is 18%, and the tax collected is $\textsf{₹}90$, what was the price of the product before GST?

(A) $\textsf{₹}500$

(B) $\textsf{₹}410$

(C) $\textsf{₹}490$

(D) $\textsf{₹}1,000$

Question 15. The total tax liability on an income of $\textsf{₹}6,00,000$ using the slabs from Question 10 (0-2.5L @0%, 2.5-5L @5%, 5-10L @20%) is:

(A) $\textsf{₹}12,500$

(B) $\textsf{₹}20,000$

(C) $\textsf{₹}32,500$

(D) $\textsf{₹}1,20,000$

Question 16. A shopkeeper sells goods worth $\textsf{₹}20,000$ (base price) and charges 5% GST. The total amount the customer pays is:

(A) $\textsf{₹}1,000$

(B) $\textsf{₹}20,000$

(C) $\textsf{₹}21,000$

(D) $\textsf{₹}20,500$

Question 17. The primary authority responsible for collecting Income Tax in India is:

(A) State Government

(B) Central Government

(C) Local Municipality

(D) Reserve Bank of India

Question 18. If an income is fully tax-exempt, it means:

(A) It is subject to the highest tax slab.

(B) No tax is payable on that income.

(C) It is subject to GST.

(D) It is included in taxable income but gets a deduction later.

Question 19. Which tax is typically paid by the consumer at the point of purchase of goods or services?

(A) Income Tax

(B) Property Tax

(C) GST

(D) Corporate Tax

Question 20. Taxable income is derived from Gross Total Income by subtracting:

(A) Tax paid

(B) Deductions allowed under various sections of the tax act

(C) All expenses incurred

(D) GST collected

Question 1. A typical utility bill (like electricity or water) includes charges based on consumption (usage) and also:

(A) A percentage of the customer's income.

(B) Fixed charges regardless of usage.

(C) The market value of the utility infrastructure.

(D) Depreciation of assets.

Question 2. Tariff rates in a utility bill specify the:

(A) Total amount payable.

(B) Cost per unit of consumption (e.g., per kWh for electricity, per litre for water).

(C) Fixed monthly charge.

(D) Surcharge amount.

Question 3. An electricity bill often uses 'tiered' or 'slab' tariff rates. This means the rate per unit consumed:

(A) Is the same regardless of total consumption.

(B) Decreases as consumption increases.

(C) Increases as consumption increases.

(D) Depends on the time of day the electricity is used.

Question 4. A Surcharge on a bill is an additional charge levied:

(A) As a discount for prompt payment.

(B) As a penalty for late payment or for other specific reasons.

(C) For meter reading services.

(D) Based on the principal amount of a loan.

Question 5. A fixed charge on a utility bill covers costs that are not directly related to the amount of utility consumed, such as:

(A) The cost of the raw material (e.g., water source).

(B) Maintenance of infrastructure (meters, lines, etc.).

(C) Fuel costs for power generation.

(D) The variable cost of delivery.

Question 6. Assume Electricity Tariff Rates: First 100 units @ $\textsf{₹}5$/unit, Next 200 units @ $\textsf{₹}7$/unit. Fixed Charge: $\textsf{₹}100$. If a consumer uses 150 units, the total energy charge is:

(A) $\textsf{₹}750$

(B) $\textsf{₹}350$

(C) $\textsf{₹}1,100$

(D) $\textsf{₹}850$

Question 7. Using the data from the previous question (Tariffs & Fixed Charge) and consumption of 150 units, the total bill amount (Energy Charge + Fixed Charge) is:

(A) $\textsf{₹}850$

(B) $\textsf{₹}950$

(C) $\textsf{₹}1,200$

(D) $\textsf{₹}1,050$

Question 8. If a Water Supply Bill charges $\textsf{₹}15$ per 1,000 litres for the first 10,000 litres and $\textsf{₹}20$ per 1,000 litres thereafter, plus a fixed charge of $\textsf{₹}50$, what is the bill for consuming 15,000 litres?

(A) $\textsf{₹}150$

(B) $\textsf{₹}250$

(C) $\textsf{₹}300$

(D) $\textsf{₹}350$

Question 9. A service charge is a fee levied for specific services provided, such as:

(A) The raw material cost.

(B) Meter reading, billing, or maintenance.

(C) The core utility usage.

(D) Government taxes.

Question 10. When interpreting a utility bill, it is important to identify the:

(A) Billing Period

(B) Usage/Consumption

(C) Applicable Tariff Rates and other charges

(D) All of the above

Question 11. If your electricity bill shows a usage of 300 kWh and the rate is a flat $\textsf{₹}8$ per kWh, plus a fixed charge of $\textsf{₹}150$, the total bill before any taxes is:

(A) $\textsf{₹}2,400$

(B) $\textsf{₹}2,550$

(C) $\textsf{₹}2,700$

(D) $\textsf{₹}2,250$

Question 12. Bills for piped natural gas (PNG) typically charge based on consumption measured in:

(A) Litres

(B) Kilograms

(C) Standard Cubic Meters (SCM)

(D) Gallons

Question 13. If a bill includes a charge calculated as a percentage of the total usage charge, this might be referred to as a:

(A) Fixed Charge

(B) Service Charge

(C) Surcharge or Fuel Adjustment Charge

(D) Meter Rent

Question 14. Understanding your utility bill helps you to:

(A) Calculate your annual income tax.

(B) Plan your loan repayments.

(C) Control your consumption and manage expenses effectively.

(D) Determine the market value of your property.

Question 15. If an electricity meter reading on Jan 1st was 1000 units and on Feb 1st was 1250 units, the consumption for the month is:

(A) 1000 units

(B) 1250 units

(C) 250 units

(D) 2250 units

Question 16. A common component in many utility bills that contributes to the fixed charge is:

(A) The cost of the resource itself (e.g., water or electricity fuel).

(B) Meter rental or maintenance fees.

(C) Taxes on consumption.

(D) Surcharges for high usage.

Question 17. If a bill has a tiered tariff and your usage falls into the second tier, the units in the first tier are charged at:

(A) The second tier rate.

(B) The first tier rate.

(C) An average of the two rates.

(D) Zero rate.

Question 18. Which of the following is usually NOT a component of a standard water bill?

(A) Water Usage Charge

(B) Sewerage Charge (often linked to water usage)

(C) Meter Rent

(D) Fuel Adjustment Surcharge

Question 19. If your monthly electricity bill is $\textsf{₹}2,000$ and includes a fixed charge of $\textsf{₹}100$, the variable charge based on usage is:

(A) $\textsf{₹}100$

(B) $\textsf{₹}2,000$

(C) $\textsf{₹}1,900$

(D) $\textsf{₹}2,100$

Question 20. Reading and interpreting bills is important for:

(A) Identifying errors in billing.

(B) Monitoring and controlling expenditure.

(C) Understanding consumption patterns.

(D) All of the above.