Skip to content

CS Professional · Banking and Insurance - Laws and Practice · Calculation of Interest and Annuities

Meera deposits Rs 50,000 in a bank account that pays simple interest at 8% per annum. She leaves the money for 3 years. What is the total amount (future value) she will receive at maturity?

The maturity amount is Rs 62,000. Simple interest is 50,000 x 8% x 3 = Rs 12,000, and adding this to the principal of Rs 50,000 gives the future value. Rs 12,000 alone is just the interest earned.

  1. ARs 62,000Correct
  2. BRs 12,000
  3. CRs 62,986
  4. DRs 52,000

Explanation

Simple interest = 50,000 x 8% x 3 = Rs 12,000. Future value = principal + interest = 50,000 + 12,000 = Rs 62,000. Rs 12,000 is only the interest, not the maturity amount. Rs 62,986 wrongly uses annual compounding.

Did you get it right without looking?

One question tells you little. A timed set on Calculation of Interest and Annuities shows your real accuracy, how long you take and where you lose marks.

Practise Calculation of Interest and AnnuitiesFree diagnostic mock

More Calculation of Interest and Annuities questions