## SOLVED CAIIB COMBINED PAPER 11:

**1. What will be value after 3 years, if you deposit Rs. 5000 each year at 10% interest?**

**a. Rs. 16250**

b. Rs. 16550

c. Rs. 16750

d. Rs. 17250

b. Rs. 16550

c. Rs. 16750

d. Rs. 17250

**Ans - b**

**Solution :**

**Future value of annuity = A/r ×{ (1+r)^n-1}**

**FV = 5000/0.1×{(1+0.1)^3-1}**

= 5000/0.1*{(1.01)^3-1}

= 5000/0.1(1.331-1)

= 5000/0.1*0.331

= Rs. 16550

= 5000/0.1*{(1.01)^3-1}

= 5000/0.1(1.331-1)

= 5000/0.1*0.331

= Rs. 16550

2. Money has a time value is shown by which of the following concept.

2. Money has a time value is shown by which of the following concept.

**a. Market value**

b. Face value

c. Present Value

d. b & C

b. Face value

c. Present Value

d. b & C

**Ans - c**

3. ABC Ltd has just issued a 10 year 7 % coupon bond. The face value of the bond is Rs 1000 and the bond makes annual coupon payments. If the required return on the bond is 10%, what is the bond's price?

3. ABC Ltd has just issued a 10 year 7 % coupon bond. The face value of the bond is Rs 1000 and the bond makes annual coupon payments. If the required return on the bond is 10%, what is the bond's price?

**a. Rs 815.66**

b. Rs 923.67

c. Rs 1000.00

d. Rs 1256.35

b. Rs 923.67

c. Rs 1000.00

d. Rs 1256.35

**Ans - a**

**Solution :**

**Formula coupon/roi*(1+roi)^n-1/ (1+roi)^n + Fv/(1+roi)^n**

**Here coupon is 70 (1000*7%), roi 10/100 that is 0.10, n is 10, Fv is 1000**

**PV = PV(coupon)+PV(Face value)**

**use A/R[(1+R)^n-1)/(1+R)^n} to find out pv of coupon**

**use fv/(1+R)^n to find out pv of face value**

4. How much money will a student owe at graduation if she borrows Rs. 3000 per year @ 5% interest during each of her four years of school?

4. How much money will a student owe at graduation if she borrows Rs. 3000 per year @ 5% interest during each of her four years of school?

**a. 12390**

b. 12093

c. 12930

d. 12039

b. 12093

c. 12930

d. 12039

**Ans - c**

**Explanation :**

**Here,**

**P = Rs. 300**

T = 4 years

R = 5%

T = 4 years

R = 5%

**FV = P / R * [(1+R)^T - 1]**

**FV = 3000 × (1.054 – 1) ÷ 0.05**

= 12930

= 12930

5. Calculate the Future Value of Present Value of Rs. 10000/- after 4 years if the rate of interest is 10%.

5. Calculate the Future Value of Present Value of Rs. 10000/- after 4 years if the rate of interest is 10%.

**a. 13310**

b. 14641

c. 14461

d. 13130

b. 14641

c. 14461

d. 13130

**Ans - b**

**Solution :**

**FV = P(1+r)n**

FV = 10000(1+10/100)^4

= 10000(1.1)^4

= 10000*1.4641

= 14641

FV = 10000(1+10/100)^4

= 10000(1.1)^4

= 10000*1.4641

= 14641

6. A border patrol checkpoint that stops every passenger van is using

6. A border patrol checkpoint that stops every passenger van is using

**a. Simple random sampling**

b. Systematic sampling

c. Stratified sampling

d. Complete enumeration

b. Systematic sampling

c. Stratified sampling

d. Complete enumeration

**Ans - d**

7. A bond has been issued for a 10 year 12% coupon bond. The face value of the bond is Rs 1000.00 and the bond makes annual coupon payments. If the bond is trading at Rs 967.25 , what is the bond's yield to maturity?

7. A bond has been issued for a 10 year 12% coupon bond. The face value of the bond is Rs 1000.00 and the bond makes annual coupon payments. If the bond is trading at Rs 967.25 , what is the bond's yield to maturity?

**a. 12.00%**

b. 12.59%

c. 11.26%

d. 13.27%

b. 12.59%

c. 11.26%

d. 13.27%

**Ans - b**

**Solution :**

**Replace C with 120, F with 1000, P with 967.25, n with 10. Now, let us substitute the values :**

**= 120+(1000-967.25)/10/ (0.64*967.25)+(0.36*1000)* 100**

**= 120+(32.75/10)/ 619.04+ 360 * 100**

= 120+ 3.275/ 979.04* 100

= 123.275/ 979.04* 100

= 0.125914*100

= 12.59%

= 120+ 3.275/ 979.04* 100

= 123.275/ 979.04* 100

= 0.125914*100

= 12.59%

8. A fund which is created by companies to make payment of balloon repayment loans by regular annual contributions to have adequate funds at the end of the period, when repayment fails due is called...

8. A fund which is created by companies to make payment of balloon repayment loans by regular annual contributions to have adequate funds at the end of the period, when repayment fails due is called...

**a. reserve fund**

b. balloon fund

c. sinking fund

d. repayment fund

b. balloon fund

c. sinking fund

d. repayment fund

**Ans - c**

9. A quarterly repayments of a loan carry an interest rate of 8 % per annum. What is the effective annual interest rate?

9. A quarterly repayments of a loan carry an interest rate of 8 % per annum. What is the effective annual interest rate?

**a. 8.4 %**

b. 8.2 %

c. 8.3 %

d. 8.5 %

b. 8.2 %

c. 8.3 %

d. 8.5 %

**Ans - b. 8.2 %**

**Solution :**

**EAR i = (1 + r/m)^m - 1]**

= (1+8/4)^4-1)

= (1+8/4)^4-1)

10. Present value is Rs.20000. Interest rate is 12 % per annum. Interest is compounded on quarterly basis. What will be the cash flow at the end of first year?

10. Present value is Rs.20000. Interest rate is 12 % per annum. Interest is compounded on quarterly basis. What will be the cash flow at the end of first year?

**a. 25210**

b. 22150

c. 22510

d. 21520

b. 22150

c. 22510

d. 21520

**Ans - c**

**Solution :**

**Now there are 4 quarters (as compounding is quarterly) Interest rate per quarter is 3 per cent. So,**

**C4 = PV(1+i/100)^4**

= 10000(1.03)^4

= 10000*1.125509

= 22510

= 10000(1.03)^4

= 10000*1.125509

= 22510

**11. A population having a stated or limited size is called as...**

**a. Limited Population**

b. Infinite Population

c. Finite Population

d. unlimited Population

b. Infinite Population

c. Finite Population

d. unlimited Population

**Ans - c**

12. An annuity consists of monthly repayments of Rs. 600 made over 20 years and if rate is 14% monthly. What is the present value of the annuity?

12. An annuity consists of monthly repayments of Rs. 600 made over 20 years and if rate is 14% monthly. What is the present value of the annuity?

**a. 48872**

b. 42878

c. 48728

d. 48278

b. 42878

c. 48728

d. 48278

**Ans - d**

**Explanation :**

**Apply FV formula to get the Answer**

**Here**

R = 14% / 12 = 0.01166

T = 20 × 12 = 240

PV = FV ÷ (1+r)t = 48278

R = 14% / 12 = 0.01166

T = 20 × 12 = 240

PV = FV ÷ (1+r)t = 48278