NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Investment Landscape
Ms. Kavita invested Rs 2,00,000 in a fixed deposit at 10% per annum compounded annually. What will be the maturity value at the end of 2 years?
The maturity value is Rs 2,42,000. Compounding at 10% turns Rs 2,00,000 into Rs 2,20,000 after year one and then Rs 2,42,000 after year two, because the second year's interest is earned on the first year's interest as well.
- ARs 2,40,000
- BRs 2,42,000Correct
- CRs 2,20,000
- DRs 2,44,000
Explanation
Year 1: 2,00,000 x 1.10 = 2,20,000. Year 2: 2,20,000 x 1.10 = 2,42,000. Rs 2,40,000 is the simple interest answer; Rs 2,20,000 covers only one year; Rs 2,44,000 wrongly adds compounding twice.
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