## SOLVED JAIIB COMBINED PAPER 14:

**1. A sum amounts to Rs. 2,916 in 2 years and to Rs. 3,149.28 in 3 years at Compound interest. The sum is......**

**a. Rs. 1,500**

b. Rs. 2,000

c. Rs. 2,500

d. Rs. 3,000

b. Rs. 2,000

c. Rs. 2,500

d. Rs. 3,000

**Ans - c**

2.

2.

**Bonds may be secured by ......**

(i) Floating charge on assets,

(ii) Fixed charge on assets,

(iii) Unsecured bonds are also issued

(i) Floating charge on assets,

(ii) Fixed charge on assets,

(iii) Unsecured bonds are also issued

**a. Only (i) and (ii)**

b. Only (i) and (iii)

c. Only (ii) and (iii)

d. (i), (ii) and (iii)

b. Only (i) and (iii)

c. Only (ii) and (iii)

d. (i), (ii) and (iii)

**Ans - d**

3.

3.

**Minimum capital requirement is expressed in terms of...**

**a. Credit Risk**

b. Specific Risk

c. General Market Risk

d. Both b & c

b. Specific Risk

c. General Market Risk

d. Both b & c

**Ans - d**

4.

4.

**A sum of Rs 12,500 amounts to Rs. 15,500 in the 4 years at the rate of simple interest. Find the rate percent**

**A. 6 %**

B. 7 %

C. 8 %

D. 9 %

B. 7 %

C. 8 %

D. 9 %

**Ans - A**

**Explanation:**

**S.I.=P*R*T/100**

=>R=S.I.*100/P/T

=>R=S.I.*100/P/T

**So, S.I = 15500 - 12500 = 3000.**

**=>R = 3000*100/12500/4**

= 6%

5.

= 6%

5.

**What is the present worth of Rs. 132 due in 2 years at 5% simple interest per annum.**

**A. 110**

B. 120

C. 130

D. 140

B. 120

C. 130

D. 140

**Ans - B**

**Explanation:**

**Let the present worth be Rs.x**

**Then,S.I.= Rs.(132 - x)**

**=› (x*5*2/100) = 132 - x**

**=› 10x = 13200 - 100x**

**=› 110x = 13200**

**x= 120**

6.

6.

**The shortcomings of payback method are ......**

(i) It does not take into account the time value of money, (ii) The choice of

(i) It does not take into account the time value of money, (ii) The choice of

**payback period is arbitrary,**

(iii) Only those cash flows are considered which fall in the payback period

(iii) Only those cash flows are considered which fall in the payback period

**a. Only (i) and (ii)**

b. Only (i) and (iii)

c. Only (ii) and (iii)

d. (i), (ii) and (iii)

b. Only (i) and (iii)

c. Only (ii) and (iii)

d. (i), (ii) and (iii)

**Ans - d**

7.

7.

**A person invested Rs. 500000 in a bank FDR @ 8% p.a. for 1 year. If interest is compounded on yearly basis, the amount payable**

**shall be ......**

**a. 520000**

b. 540000

c. 560000

d. 580000

b. 540000

c. 560000

d. 580000

**Ans - b**

**Solution:**

**P = 500000**

R = 8% yearly

T = 1 yr

R = 8% yearly

T = 1 yr

**Since compounding is annually and its only 1-time investment, the formula to be used:**

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

**So,**

FV = 500000 * (1+0.08)^1

= 540000 Ans.

FV = 500000 * (1+0.08)^1

= 540000 Ans.

8.

8.

**Private Sector Companies can issue .......... bonds.**

**a. Secured**

b. Unsecured

c. Any one of the above

d. None of these

b. Unsecured

c. Any one of the above

d. None of these

**Ans - c**

9.

9.

**According to IRR, undertake those investments that has highest IRR, provided the IRR is ...... the cost of capital**

**a. Greater than**

b. Equal to

c. Less Than

d. None of these

b. Equal to

c. Less Than

d. None of these

**Ans - a**

10.

10.

**A person invested Rs. 1000000 in a bank FDR @ 12% p.a. for 1 year. If interest is compounded on quarterly basis, the amount payable shall be ......**

**a. 1095209**

b. 1125509

c. 1130509

d. 1145509

b. 1125509

c. 1130509

d. 1145509

**Ans - b**

**Solution:**

**P = 1000000**

R = 12% / 4 = 0.03 (since compounding is quarterly, rate is divided by 4)

T = 1*4 = 4 (since compounding is quarterly, time is multiplied by 4)

R = 12% / 4 = 0.03 (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 = 1000000 * (1+0.03)^4

= 1125509

FV = 1000000 * (1+0.03)^4

= 1125509

**11.**

**A sum of money doubles itself in 16 years at simple interest with yearly rate of...**

**a. 5.25 %**

b. 6.25 %

c. 7.25 %

d. 8.25 %

b. 6.25 %

c. 7.25 %

d. 8.25 %

**Ans - b**

12.

12.

**In perpetual bonds, only ...... paid.**

(i) Interest, (ii) Maturity

(i) Interest, (ii) Maturity

**a. Only (i)**

b. Only (ii)

c. Either (i) or (ii)

d. Both (i) and (ii)

b. Only (ii)

c. Either (i) or (ii)

d. Both (i) and (ii)

**Ans - a**