NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Time Value of Money
Ramesh invests Rs 1,00,000 in a deposit that pays 8% per annum compounded half-yearly. What will be the maturity value after 1 year?
The maturity value is Rs 1,08,160. Half-yearly compounding at 8% per annum gives 4% per period for two periods, so 1,00,000 multiplied by 1.04 squared equals Rs 1,08,160, which is higher than the simple interest result.
- ARs 1,08,000
- BRs 1,08,160Correct
- CRs 1,08,243
- DRs 1,04,000
Explanation
Half-yearly rate is 4% for 2 periods. FV = 1,00,000 x 1.04 x 1.04 = 1,08,160. Rs 1,08,000 is simple interest for one year, which ignores compounding. Rs 1,04,000 is only one half-year of growth.
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