__AFB Last Minute Revision__

Paper XII

Paper XII

P = 100000

R = 6% / 4 = 0.015 (since compounding is quarterly, rate is divided by 4)

T = 1 *4 = 4 (since compounding is quarterly, time is multiplied by 4) Since compounding is quarterly and its only 1-time investment, the formula to be used:

FV = P * (1+R)^T So,

FV = 100000 * (1+0.015)^4

= 106136 (paise rounded) Ans.

2. An asset cost Rs. 16,00,000/- has residual value of Rs. 1,00,000/-, and is expected to last 5 years. Calculate the depreciation for 2nd year using sum of the digits Method.

D = (nth/E(sigma)n)(cost-Residual Value)

E(sigma)n = 1+2+3+4+5 = 15

Cost-Residual Value = 1600000 - 100000 = 1500000 1st year = 5/15(1500000) = 500000

2nd year = 4/15(1500000) = 400000

3rd year = 3/15(1500000) = 300000

4th year = 2/15(1500000) = 200000

5th year = 1/15(1500000) = 100000

3. Ram availed a house loan of Rs. 20 lac @ 12% ROI repayable in 15 years. Calculate EMI.

P = 10 lac

R = 12% / 12 = 0.01% (In EMI or Equated Monthly Installment), we need to find monthly rate, so we divide rate by 12)

T = 12*15 = 180 (In EMI or Equated Monthly Installment, we multiply time with 12)

The formula of EMI = P * R * (1 + R)^T ÷ { (1 + R)^T - 1 } So, EMI = 2000000*0.01*(1+0.01)^180 ÷ {(1+0.01)^180 – 1}

= (2000000*0.01*5.9958) ÷ 4.9958

= 119916 / 4.9958

= 24003

4. What is the principal amount which earns Rs. 264 as compound interest for the second year @ 10% p.a.?

A = P(1+r/100)n

In the formula, A represents the final amount in the account after n years at interest rate 'r' with starting amount 'p'. P 2nd year = 2640

A 1st Year = 2640

P 1st = (2640/110*100) = 2400

5. Simple interest on a sum at 5% p.a. for two years is Rs.500. The compound interest on the same sum, rate of interest and for the same period is......

Let us first find the Principal Amount Simple Interest for 2 years @ 5% = 500

So, for 1 year @ 5% = 500/2 = 250

So, the Principal Amount = 250/5*100 = 5000 Now let us calculate, compound interest on Rs. 5000 at 5% p.a for 2 years

A = P(1+r/100)^n

= 5000 (1+5/100)^2

= 5000 (1.05)^2

= 5000 (1.1025)

= 5512.50 CI = Amount - Principal

= 5512.50 - 5000

= 512.50

So, compound interest on Rs. 5000 at 5% p.a for 2 years is : Rs. 512.50