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Q:

An amount of 5,000 is invested at a fixed rate of 8 per cent per annum. What amount will be the value of the investment in five years time, if the interest is compounded annually

A) 7346.64	B) 8346
C) 3456	D) 4567

Answer & Explanation Answer: A) 7346.64

Explanation:

The only part of this type of calculation that needs particular
care is that concerning the interest rate. The formula assumes that
r is a proportion, and so, in this case:
r = 0.08
In addition, we have P = 5,000 and n = 5, so:
V = P(1 + r)5 = 5,000 x (1 + 0.08)5 = 5,000 x 1.469328 = 7,346.64
Thus the value of the investment will be 7,346.64

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Filed Under: Compound Interest
Exam Prep: Bank Exams
Job Role: Bank PO

Q:

Calculate the effective interest rate of a 10% annual rate compounded continuously.

A) 9.52%	B) 10.52%
C) 11.52%	D) 12.52%

Answer & Explanation Answer: B) 10.52%

Explanation:

E=e^i-1

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Filed Under: Compound Interest
Exam Prep: Bank Exams
Job Role: Bank PO

Q:

Calculate the effective interest rate compounded quarterly of a 13% annual rate.

A) 13.65%	B) 14.665%
C) 15.65%	D) 16.65%

Answer & Explanation Answer: A) 13.65%

Explanation:

E=(1+i/n)^n-1

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Filed Under: Compound Interest
Exam Prep: Bank Exams
Job Role: Bank PO

Q:

Find the annual interest rate that produces $100,000 from $20,000 in 15 years.

A) 9.33%	B) 10.33%
C) 11.33%	D) 12.33%

Answer & Explanation Answer: C) 11.33%

Explanation:

l=(F/P)^1/n-1

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Filed Under: Compound Interest
Exam Prep: Bank Exams
Job Role: Bank PO

Q:

Find the principal which yields $25,000 when invested at 3% annually for 20 years.

A) 13841.89	B) 14821
C) 13468	D) 57389

Answer & Explanation Answer: A) 13841.89

Explanation:

$P = \frac{F}{{(1 + i)}^{n}}$

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Filed Under: Simple Interest
Exam Prep: Bank Exams
Job Role: Bank PO

Q:

You put $750 into a certificate of deposit. Your simple annual interest rate is 4%. You receive a check for the interest at the end of each year. How long will it take to earn $150 in interest?

A) 5years	B) 6years
C) 7years	D) 8years

Answer & Explanation Answer: A) 5years

Explanation:

I=prt

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Filed Under: Simple Interest
Exam Prep: Bank Exams
Job Role: Bank PO

Q:

You deposit $600 into a 6 month certificate of deposit. After 6 months the balance is $618. Find the simple annual interest rate.

A) 5%	B) 4%
C) 6%	D) 7%

Answer & Explanation Answer: C) 6%

Explanation:

I=prt

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Filed Under: Simple Interest
Exam Prep: Bank Exams
Job Role: Bank PO

Q:

A loan shark made a loan of $100 to be repaid with $120 at the end of one month. What was the annual interest rate?

A) 210%	B) 220%
C) 230%	D) 240%

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