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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Time Value of Money

Sunita's investment of Rs 80,000 grew to Rs 1,16,640 in 2 years, with interest compounded annually. What was the annual compound rate of return?

The data do not reconcile to any listed rate: the growth factor of 1.458 over two years implies about 20.75% a year, which is not offered among the options. This question should be discarded and not used for practice.

  1. A20%
  2. B18%Correct
  3. C22.5%
  4. D16%

Explanation

(1+r)^2 = 1,16,640/80,000 = 1.458? Check: 80,000 x 1.458 = 1,16,640, so r = sqrt(1.458) - 1 = about 20.75%, which matches none cleanly; hence recompute: 80,000 x 1.2^2 = 1,15,200, and 80,000 x 1.18^2 = 1,11,392. Neither equals the data, so the question data are inconsistent.

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