The Professionals’ Academy of Commerce

Quantitative Methods
Topic: Finance
1. XYZ and company has developed a new product which would earn a revenue of Rs. 800
million during the first year. Thereafter, the revenue will decline by 20 % every year. The company would be
able to earn total profit over the life is.

a. 400 million

b. 500 million

c. 200 million

d. Cannot be determined

2. A person borrows Rs.5000 for 2 years at 4% p.a. simple interest. He immediately lends it to another
person at 61⁄4% p.a for 2 years. Find his gain in the transaction.

A. Rs. 167.50 B. Rs. 150

C. Rs.225 D. Rs. 112.50

3. What will be the ratio of simple interest earned by certain amount at the same rate of interest for 5
years and that for 15 years?

A. 3 : 2 B. 1 : 3

C. 2 : 3 D. 3 : 1

4. A certain amount earns simple interest of Rs. 1200 after 10 years. Had the interest been 2% more,
how much more interest would it have earned?

A. Rs. 25 B. None of these

C. Rs. 120 D. Cannot be determined

5. The difference between Compound and simple interests on a certain sum of money for 2 years at
4% per annum is Re. 1. The sum is:

A. Rs.600 B. Rs.645

C. Rs.525 D. Rs.625

6. A sum is invested for 3 years compounded at 5% in first year, 10% in second year and 20 % in third
year. In three years, if the sum amounts to Rs. 1386, then find the sum.

A. Rs. 1500 B. Rs. 1400

C. Rs. 1200 D. Rs. 1000

7. A sum of money borrowed and paid back in two annual instalments of Rs. 882 each allowing 5%
compound interest. The sum borrowed was:

A. Rs.1820 B. Rs.1640
 C. Rs.1260 D. Rs.1440

8. Andrews earns an interest of Rs. 1596 for the third year and Rs. 1400 for the second year on the
same sum. Find the rate of interest if it is lent at compound interest.

A. 12% B. 13%

C. 14% D. 15%

9. Project whose cash flows are sufficient to repay capital invested at a unique rate of return then net
present value will be

A. negative

B. zero

C. positive

D. independent

10. If the discount rate is 9%, the present value of Rs. X is received at the end of each year for a period
of four years is equal to?

a. 3.42x

b. 3.24x

c. 4x

d. 3.89x

11. Sohail is receiving interest from Fast bank at 14% compounded semi-annually. Slow bank wants
motivate Sohail to shift his reserves from Fast bank and offers 13.16% compounded quarterly. Sohail will:

a. Motivated to do so

b. Not motivated to do so

12. A firm is considering three investment projects which we will refer to as A, B, and C. Each project
has an initial cost of $10 million. Investment A offers an expected rate of return of 16%, B of 8%, and C of
12%. The firm's cost of capital is 6% if it borrows $10 million, 10% if it borrows $20 million, and 15% if it
borrows $30 million. Which project(s) should the firm invest in?

a. Just A, because it offers the highest rate of return and is the only investment that has a rate of return
higher than 15%

b. All three should be undertaken, because the rate of return on B is above 6%, on C is above 10%,
and on A is above 15%.

c. Only A and C should be undertaken because both have rates of return that are greater than 10%.

d. None of the above is correct.

a. the present value of all net cash flows that result from the project

b. the present value of all revenues minus the present value of all costs that result from the project

c. the present value of all future net cash flows that result from the project minus the initial investment
required to start the project

d. All of the above are correct.

14. A has two grandsons P and Q. 13 year old P gets some money from A’s wealth and 14 year old Q gets
rest of the money. But P and Q will get money only when they turn 25 years old till then the money is in a
bank getting interest at rate 4% compounded annually. When both turn 25, they received the same
amount. How much amount A, deposited for Q initially, if total money with A was Rs.25500?

a. Rs. 12500

b. Rs. 13000

c. Rs. 15000

d. Rs. 11500

15. A man deposited $1000 in a bank. In return he got $1331. Bank gave interest 10% per annum. How long
did he kept the money in the bank?

A. 3 years 2 Months B. 3 years 4 Months

C. 3 years 5 Months D. 3 years 6 Months

17. A bank launched a new scheme where it offers 400000 per year for indefinite time after 8 years.
How much amount should bank require to collect today from customer if it offers 5% interest
compounded annually.

a. 8 million

b. 5.6 million

c. 5.4 million

d. Cannot be determined

18. The owner of a new start up software company needs $5,000 to get his business started on May 1st.
So, owner discounts a 100 day note with a bank which discounts at a rate of 13%, what is the face (loan)
value to be repaid in 100 days?

(a) 1236.33

(b) 5000.00

(c) 3231.66

(d) 4821.26
19. Arsalan deposited some of his money in bank A and earned compound interest at for 3 years equal
to Rs. 1,270.If he invests the same sum of money in Bank B then simple interest on the same sum at the
same rate and for the same period is:

a. Rs. 1,200

b. Rs. 1,165

c. Rs. 1,080

d. Rs.1,220

20. Zafar has borrowed 950,000 to buy a warehouse .The loan is for 10 years at an annual interest rate
of 12% compound quarterly. The amount of quarterly payment which he must make to pay back the loan
and the interest he would pay is_____

a) Rs. 41,199.26 & Rs. 693,971.36

b) Rs. 41,299.26 & Rs. 693,972.36

c) Rs.41,099.26 & Rs.693,970.36

d) Rs. 41,399.26 & Rs.693,973.36

21. How much money is needed to establish a scholarship fund paying Rs. 1500 annually? If the fund
will earn interest at 3% and the first payments will be made immediately

a) 50,100

b) 50,500

c) 60,500

d) 51,500

22. A research foundation was established by a fund of Rs. 500,000 invested at rate that would provide
20,000 payments at the end of each year forever .What interest rate was being earned on fund?

a. 5%

b. 3%

c. 4%

d. 6%

23. M/s. ABC Limited is expected to pay Rs.18 every year on a share of its stock. What is the present
value of a share if money worth is 9% compounded annually?

a. Rs.300

b. Rs.200

c. Rs.400

d. Rs.100
24. A project has an IRR of 30%. He invested Rs. 750,000 today and a single cash inflow generated after
three years. Compute the NPV at the 13% rate of return.

a. 40532

b. -40532

c. 790532

d. 391973

25. Fahad will invest Rs. 35,000 at the start of each year for three years starting one year from now.
Compute the total amount he will have at the end of third year if interest rate is 10% per annum.

a. 115850

b. 125850

c. 110850

d. 112850

26. A project has net present value of Rs. 15000 when discount rate is 15%. What will be the net present
value if discount rate increase to 20%.

a. 11111

b. 16000

c. 18028

d. 17028

27. A project has internal rate of return of 15%. Thre is only one cash outflow of Rs. 750000 today and a
single cash inflow of certain amount three years from now. The net present value will be Rs. 40000 if the
rate changed to 13%. T/F

28. An investment project has a net present value of Rs. 524564 when its cash flows are discounted at
13% per year. Cash flows from the project are Rs. 500000 at the end of each year for three years starting
from the end of third year. Compute the investment made today for the project.

a. 350000

b. 375000

c. 425000

d. 400000

29. An investment of 1.5 million is made in a business for a years and gain is 0.5 million. Find the rate of
gain under compound interest?

a. 0.54%

b. 0.5%
c. 0.45%

d. 0.33%

30. If the present value is 10million and interest is 750000 in 4 years and 10 months. Find the simple
rate of interest.

a. 0.10

b. 0.01

c. 0.02

d. 0.055