Business Math for CAIIB III

Objective Questions
By
Ravindra A. Kamath

 How much will Rs.80,000 amount to in 2

years, at compound interest, if the rates
for the successive years are 12% and
15%?
(a) Rs.97,600
(b) Rs.1,04,440
(c) Rs.1,03,040
(d) Rs.24,440

 The compound interest on a sum of

money for 2 years is Rs.880 and the
simple interest on the same sum for the
same period & at the same rate of interest
is Rs.800. What is the sum?
(a) Rs. 4,000
(b) Rs. 1,000
(c) Rs. 2,400
(d) Rs. 2,000

 The C.I, compounded annually, on an

investment for the second year is Rs.2420
and for the third year is Rs.2662. What is
the principal invested?
(a) Rs.22,000
(b) Rs.2,000
(c) Rs.20,000
(d) Rs.2,400

 How long will it take a sum of money to

become 6 times if it is invested at 12%
p.a. C.I.?
(a) 12 years
(b) 16years
(c) 18 years
(d) 36 years

 When a certain sum of money is invested for a

certain time at 8% p.a. simple interest, it
amounts to Rs.200. If the same principal is
invested for the same duration at 10% p.a
simple interest, it amounts to Rs.212.50. What is
the duration for which it was invested?
(a) 5 yrs 4 months
(b) 3 yrs 9 month
(c) 4 yrs 2 months
(d) None

 A certain sum of money invested at

compound interest earns an interest of
Rs.630 at the end of two years and
Rs.993 at the end of three years. What is
the rate of interest?
(a) 10%
(b) 20%
(c) 15%
(d) None.

 Mr. Navin invested in a bond at C. M. P. of

Rs. 970/- If Face Value is Rs. 1000,
Maturity Period is 5 years and coupon rate
is 9% p.a. What is his Y.T.M.?
a. 9.50%
b. 9.25%
c. 9.75%
d. 10%

 Mr. Modi wants to sell a bond of Face

Value Rs. 10000/- with coupon rate 11% &
maturity period 6 years. At what price he
should sell it if market rate is 10%?
a. below Rs. 10435/ b. below Rs. 10,300/ c. above Rs. 10435/ d. above Rs. 10,300/-

 Calculate the I.R. R. of a project with C.

Fs as under:
0 yr. 1,000,000;
1yr.
200,000
2 yr.
400,000
3 yr.
600,000
a. 8.25%
b. 8.00%
c. 8.50%
d. 7.50%

 Calculate the NPV of a project with FCFs

as above and capital cost is 15% p.a.
a. 870880
b. 120120
c. 130120
d. -129120

 Calculate the Average rate of returns for

the above FCFs
a. 13.00%
b. 13.35%
c. 13.50%
d. 13.75%

 Current Price of a share is Rs. 100. The

economic state is as follows
Economy
Probability
Price
Growth
0.6
130
Recession
0.4
90
Calculate the expected return for the stock?
a. 10%
b. 15%
c. 14%
d. 16%

a.
b.
c.
d.

In theory of Sampling the larger the

size of the sample the greater the
accuracy is based on:
law of Statistical regularity
law of Inertia of large numbers
law of Statistical imperfection
law of large numbers

If P = 0.5
Q = 0.5
= 0.05
Find the sample size
a) 1000
b) 100,000
c) 100
d) 10,000

Compute the risk associated with Apex

Ltd, having the following probability
distribution:
Return (ki)
7% 6% 7.89%
5.6%
Probability (Pi)0.20 0.30 0.40
0.10
Weighted average returns for Apex Ltd. is:
a) 6.916%
b) 7.852%
b) c) 5.906%
d) 6.508%

Compute the risk associated with Apex Ltd,

having the following probability distribution:
Return (ki)
7% 6% 7.89%
5.6%
Probability (Pi)0.20 0.30 0.40
0.10
What is the standard deviation of the returns?
a) 2.29% b) 0.898%
b) c) 1.145% d) 1.694%

Compute the risk associated with Apex

Ltd, having the following probability
distribution:
Return (ki)
7% 6% 7.89%
5.6%
Probability (Pi)0.20 0.30 0.40
0.10
What is the range of the returns?
a) 1.40% b) 1.290%
c) 2.29% d) .89%

Compute the risk associated with Apex Ltd,

having the following probability distribution:
Return (ki)
7% 6% 7.89%
5.6%
Probability (Pi)0.20 0.30 0.40
0.10
What is the coefficient of variation for this data?
a) 1.34
b) .547
c) .630
d) .1298

 The following are the data on a capital project being

evaluated by the management of X Ltd.,
Project M: Annual cost saving Rs.40,000,
Useful life 4 years
I.R.R. 15%Profitability Index
(PI) 1,064
Salvage value 0
Considering the following table of discount factors:
15% 14% 13% 12%
1 Year
0.869 0.877 0.885 0.893
2 Year
0.756 0.769 0.783 0.797
3 Year
0.658 0.675 0.693 0.712
4 Year
0.572 0.592 0.613 0.636

 The Pay back period of Project of Project

M is:
a) 2 year 11 months
b) 2 years 9 months
c) 2 years 12 months
d) None of the above

What is the cost of capital of Project M

a) 12%
b) 14%
c) 16%
d) 18%

Project-Ms NPV is:

a) 7,211
b) 7,309
c) 8,014
d) 8,020

 Cost of Project M is:

a) 1,14,600
b) 1,14,200
c) 1,14,860
d) 1,14,940

 A company manufactures Radios (x) and Tape recorders

(y). Cost of making radio & tape recorder is Rs. 225 and
Rs. 375 respectively. The company works in 2 shift
totaling 14 hrs. The production and assembly time for a
radio is 2hrs while that for tape recorder is 3 hrs. The
radio sells for Rs.250 while the tape recorder sells for
Rs.410. The company spends an amount of Rs. 75,000
per day on production. Maximize the production in terms
of optimum number of radios and tape recorders. Pick
the correct constraint equation from the choice given
against each type.

 Capacity constraint (machine time)

a) 3x + 2y 14
c) 2x + 3y 14

b) 2x + 3y 14
d) 3x + 2y 14

 Financial constraint (amount available)

a) 250x + 410y 75000

b) 3x + 5y 75000
c) 3x + 5y 1000
d) 3x + 5y 1000

 Non negativity (minimum number)

a) x > 0 ; y > 0
b) x = 0 ; y = 0
c) x 0 ; y 0
d) a & b

 Objective function (to maximize profit)

a)
b)
c)
d)

P = 25x + 35y
P = 20x + 35y
P = 25x + 30y
P = 20x + 35y

 A firm makes chairs (x) and tables (y). Each table costs
Rs.400 in material and Rs.150 in labor. Each chair costs
Rs.175 in material and Rs.75 in labor. The price of table
and chair is Rs.625 and Rs. 300 respectively. The firm
has 12 hours of time per day. The production time for
each table and chair is 4 hrs, 1.5 hrs respectively. The
firm has liquidity of Rs.7000 per day to pay for the
material and labor. The objective is to maximize the
production for the firm by optimizing the production of
tables and chairs. Pick out the correct option for each of
the constraint equation.

Capacity constraint
a) 4x + 1.5y 12
b) 1.5x + 4y 12
c) 4x + 1.5y 12
d) 1.5x + 4y 12

(machine time)

 Financial constraint (amount available)

a) 5x + 11y 14000
b) 5x + 11y 700
c) 12x + 25y 7000
d) 12x + 25y 7000

 Non negativity

a) x 0 ; y 0
b) x = 0 ; y = 0
c) x < 0 ; y < 0
d) b & c

(minimum number)

 Objective function (To maximize profit)

a) P = 75x + 50y
b) P = 50x + 75y
c) P = 55x + 75y
d) P = 75x + 50y

 Which of the following is a method of

selecting samples from a population?
a) Judgement sampling
b) Random sampling
c) Probability sampling
d) All of the above

 Suppose that a population with N=144 has

=24.What is the mean of the sampling
distribution of the mean for samples of
size 25?
a) 24
b) 2
c) 4.8
d) Cannot be determined

 Determine the sample size if standard

deviation is 6,population mean is 25 and
sample mean is 23.The desired degree of
precision is 99%.
a)60 b) 75
c) 90
d) 45

 A sample size of 90 values has a mean 55

and standard deviation 3.A second sample
of 110 values has mean 60 and standard
deviation 2.Find the mean and standard
deviation of the combined sample of 200
values.
a) 54.5;2.812
b) 62;4.345
c) 57.75;3.526
d) 61.90;3.89

 Light bulbs are manufactured in a factory

and have a mean life of 540 hours and
std.deviation of 50 hours.Calculate the
fraction of bulbs that have less than 500
hours.
a)0.54
b)0.2119 c)0.4234 d)0.3555

 Light bulbs are manufactured in a factory

and have a mean life of 540 hours and
std.deviation of 50 hours.Calculate The
fraction of bulbs having life between
500 to 600 hours.
a) 0.6730 b) 0.5478 c) 0.7734 d) 0.3487

 The mean and standard deviation of

marks of students of a class are 55 and 8
respectively. Within what interval centred
around the mean do at least 90% of marks
lie?
a)40 and 65 b)39 and 61
c)42 and 68 d)30 and 72

 A binomial distribution has n=20 and

p=0.3.Find the mean and the variance of
the distribution.
a) 8 and 3.4 b)4 and 2.6
c) 6 and 4.2 d)12 and 4.4