## SOLVED JAIIB COMBINED PAPER 16:

**1. A man invested Rs. 50000 in a stock at 90 to obtain an income of Rs. 500. The dividend from the stock is ...... %**

**a. 8**

b. 8.5

c. 9

d. 9.5

b. 8.5

c. 9

d. 9.5

**Ans - c**

**Explanation:**

**By investing Rs. 5000, income = Rs. 500**

By investing Rs. 90, income = Rs. 500/5000 x 90 = Rs. 9

By investing Rs. 90, income = Rs. 500/5000 x 90 = Rs. 9

**Dividend = 9%**

2.

2.

**A truck cost 8,900 with a residual value of 500. it is estimated the useful life of the truck is 4 years. The amount of depreciation expense in year 2 by using the declining balance at twice the straight line rate is...**

**a. 2,225**

b. 4,200

c. 4,450

d. 8,400

b. 4,200

c. 4,450

d. 8,400

**Ans - c**

3.

3.

**Zero coupons bonds ......**

**a. Do not carry any interest. It is issued at a lower price than its redemption value**

b. Carry a fixed rate of interest payable at the time of redemption of the bonds

c. Bears zero risk

d. All of the above

b. Carry a fixed rate of interest payable at the time of redemption of the bonds

c. Bears zero risk

d. All of the above

**Ans - a**

4.

4.

**Which of the following are the advantages of NPV and IRR method?**

(i) They gives exact results,

(ii) They take into account time value of money,

(iii) They focus on cash flows rather than on accounting profits

(i) They gives exact results,

(ii) They take into account time value of money,

(iii) They focus on cash flows rather than on accounting profits

**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 - c**

**5.**

**When the expected rate of interest is lower than the coupon rate a bond may be issued**

**a. At par**

b. At discount

c. At premium

d. At any rate

b. At discount

c. At premium

d. At any rate

**Ans - c**

6.

6.

**IRR is the value of the discount rate at which the NPV of a project is ......**

(i) More than zero, (ii) Less than zero

(i) More than zero, (ii) Less than zero

**a. Only (i)**

b. Only (ii)

c. Either (i) or (ii)

d. Neither (i) not (ii)

b. Only (ii)

c. Either (i) or (ii)

d. Neither (i) not (ii)

**Ans - d**

7.

7.

**ABC Company just issued a bond with a Rs. 1,000 face value and a coupon rate of 8%. If the bond has a life of 20 years, pays annual coupons, and the yield to maturity is 7.5%, what will the bond sell for?**

**a. Rs. 951**

b. Rs. 975

c. Rs. 1,020

d. Rs. 1,051

b. Rs. 975

c. Rs. 1,020

d. Rs. 1,051

**Ans - b**

8.

8.

**Anita borrowed an amount of Rs. 500000 for 10 years @ 9% ROI. What shall be monthly payment?**

**a. 8445**

b. 8454

c. 8545

d. 8554

b. 8454

c. 8545

d. 8554

**Ans - a**

**Solution:**

**P = 500000**

R = 9 % ÷ 12 = 0.0075% (In EMI, divide rate by 12)

T = 10*12 = 120 (In EMI, multiply time with 12)

R = 9 % ÷ 12 = 0.0075% (In EMI, divide rate by 12)

T = 10*12 = 120 (In EMI, multiply time with 12)

**The formula of EMI =**

P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }

So,

EMI = 500000 * 0.0075 * 1.0075^120 ÷ (1.0075^120 – 1)

= (500000*0.0075*2.4514) ÷ 1.4514

= 12257 / 1.4514

= 8445

P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }

So,

EMI = 500000 * 0.0075 * 1.0075^120 ÷ (1.0075^120 – 1)

= (500000*0.0075*2.4514) ÷ 1.4514

= 12257 / 1.4514

= 8445

9.

9.

**What annual rate of simple interest was paid if Rs. 10000 earned Rs. 1100 as interest in 2 Years and 9 months?**

**a. 2%**

b. 3%

c. 4%

d. 5%

b. 3%

c. 4%

d. 5%

**Ans - c**

10.

10.

**The risk adjusted discount rate approach for NPV determination makes a balance between**

**a. Degree of risk and rate of return**

b. Degree of profitability and investment

c. Degree of risk and degree of uncertainty

d. Avg risk avg avg return.

b. Degree of profitability and investment

c. Degree of risk and degree of uncertainty

d. Avg risk avg avg return.

**Ans - a**

11.

11.

**If a sum of money doubles itself in 8 years at simple interest, the rate percent per annum is ......**

**A. 12**

B. 12.5

C. 13

D. 13.5

B. 12.5

C. 13

D. 13.5

**Ans - B**

**Explanation:**

**Increase in 8 years = 100%**

**Simple Interest rate = (100 / 8) = 12.5 %**

12.

12.

**Anvita wants to receive a fixed amount for 10 years by investing Rs. 10 lacs @ 12% ROI. How much he will receive annually?**

**a. 167894**

b. 176984

c. 187964

d. 196874

b. 176984

c. 187964

d. 196874

**Ans - b**

**Solution:**

**P = 10 lac**

R = 12% p.a.

(SINCE PAYMENT IS TO BE RECEIVED ANNUALLY, NOT Monthly, Rate IS NOT divided by 12)

T = 10 yrs

(SINCE PAYMENT IS TO BE RECEIVED ANNUALLY, NOT Monthly, Time IS NOT multiplied with 12)

R = 12% p.a.

(SINCE PAYMENT IS TO BE RECEIVED ANNUALLY, NOT Monthly, Rate IS NOT divided by 12)

T = 10 yrs

(SINCE PAYMENT IS TO BE RECEIVED ANNUALLY, NOT Monthly, Time IS NOT multiplied with 12)

**So, we can well use simple EMI formula in this question.**

**The formula of EMI =**

P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }

So,

P * R * (1 + R)^T ÷ { (1 + R)^T - 1 }

So,

**EMI = 1000000 * 0.12 * 1.12^10 ÷ (1.12^10 – 1)**

= (1000000*0.012*3.1058) ÷ 2.1058

= 372702 / 2.1058

= 176984

= (1000000*0.012*3.1058) ÷ 2.1058

= 372702 / 2.1058

= 176984