NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to Investment
Rs 1,00,000 is invested for 2 years at 10% per annum compounded annually. What is the maturity value?
The maturity value is Rs 1,21,000. Compounding annually at 10% for two years multiplies the principal by 1.21. Simple interest would give only Rs 1,20,000 because it ignores interest earned on the first year's interest.
- ARs 1,20,000
- BRs 1,21,000Correct
- CRs 1,10,000
- DRs 1,22,100
Explanation
FV = 1,00,000 x (1.10)^2 = 1,00,000 x 1.21 = Rs 1,21,000. Rs 1,20,000 is simple interest and ignores interest on interest. Rs 1,22,100 uses three years of compounding.
Did you get it right without looking?
One question tells you little. A timed set on Introduction to Investment shows your real accuracy, how long you take and where you lose marks.
More Introduction to Investment questions
- Mr. Iyer bought a share for Rs 200, received a dividend of Rs 10 during the year, and sold it at Rs 230 at the year end. What is his holding…
- An investment of Rs 1,00,000 grows to Rs 1,21,000 at the end of two years with no interim cash flows. What is the compound annual growth rat…
- Which of the following best describes 'real rate of return' on an investment?
- Mr. Sameer Khanna can earn a nominal return of 12% a year on a deposit while inflation is 5%. Using the exact (Fisher) relationship, his rea…
- Ms. Kapoor's investment of Rs 1,00,000 grew to Rs 1,21,000 in two years with no interim cash flows. What is the compound annual growth rate …
- An investment's returns in three successive years were +20%, -10% and +25%. What is the geometric mean annual return, approximately, and how…