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Corporate Finance · Time value: compounding & annuities

BSMS2205 · 6 questions · 24 marks · 1 paper

Answer key

Indian Institute of Technology Madras

BS Degree Programme · Examination & Study Paper

BSMS2205 · Corporate Finance

Time value: compounding & annuities

Official Paper

Examination Instructions & Guidelines

Solve on notebook/paper first before checking solutions.
MCQ: Exactly 1 option is correct. Negative marking applies.
Scientific calculator allowed for all calculations.
Official answer key is sealed at the end of this sheet.

Q1MCQ4 Marks·Choose one option
Key ↓
If you want to double your money at 5% annual rate of interest, how many years will it take?
1. A
2. B
3. C
4. D
Q2MCQ4 Marks·Choose one option
Key ↓
You purchased an asset today for Rs 1,000. Suppose the asset earns an annual interest rate of 7% which is continuously compounded. What will be the value of the asset after 5 years (Rounded off to nearest integer)?
1. ARs 1350
2. BRs 1402
3. CRs 1419
4. DRs 1500
Q3MCQ4 Marks·Choose one option
Key ↓
During the cleaning of house, you find an old sword that belonged to your grandfather. Your grandfather purchased the sword 60 years ago for Rs 60. You go to the market and find out that the current value of the sword is Rs 9,000. What is the annualized rate of return that the sword has earned?
1. A60%
2. B10.87%
3. C8.71%
4. D2.50%
Q4MCQ4 Marks·Choose one option
Key ↓
What is the present value of an annuity that pays Rs 1,000 for next 25 years (beginning next year) and faces a cost of capital of 5%? (Nearest integer value)
1. ARs 25,000
2. BRs 18,394
3. CRs 14,094
4. DRs 12,500
Q5MCQ4 Marks·Choose one option
Key ↓
Manish runs a private school in his town. He wants to start a bus service for the students. He goes to the bank and asks for a loan of Rs 8,00,000. The bank official tells him that the loan will have a monthly interest rate of 3% for 10 years. What would be the equated monthly instalment (EMI) that he will be paying each month for the next 10 years, beginning next month (Round off to nearest integer)?
1. ARs 12,000
2. BRs 22,746
3. CRs 24,711
4. DRs 28,437
Q6MCQ4 Marks·Choose one option
Key ↓
For a simple perpetuity, its present value increases if
1. AFirst payment decreases
2. BDiscount rate increases
3. CPayments grow over time
4. DPayments are delayed over time

Official Key

Master Answer Key & Explanations

Official answer keys from IIT Madras BS past papers. Click any question to review.

Reveal Key

Q1A

Q2C

Q3C

Q4C

Q5C

Q6C

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