Matching Items MCQs for Sub-Topics of Topic 15: Financial Mathematics
Introduction to Interest and Accumulation
Question 1. Match the following financial terms with their definitions:
(i) Principal
(ii) Amount
(iii) Interest
(iv) Time
(a) The initial investment or loan amount.
(b) The total sum at the end of the period.
(c) The duration of the investment or loan.
(d) The cost of borrowing or return on investment.
Answer:
Question 2. Match the interest rate representation with its description:
(i) Annual Rate
(ii) Periodic Rate
(iii) 12% p.a. monthly compounding
(iv) 8% p.a. semi-annual compounding
(a) Rate applied for a period less than a year (e.g., monthly, quarterly).
(b) Rate quoted for a full year.
(c) Involves a periodic rate of 6% every six months.
(d) Involves a periodic rate of 1% every month.
Answer:
Question 3. Match the concept with its outcome:
(i) Investing Principal
(ii) Earning Interest
(iii) Money growing over time
(iv) Borrowing Money
(a) Accumulation
(b) Paying Interest
(c) Increasing the Amount
(d) Seeking Accumulation
Answer:
Question 4. Match the rate with the relevant time unit in typical contexts:
(i) Annual Interest Rate
(ii) Monthly Periodic Rate
(iii) Quarterly Periodic Rate
(iv) Semi-annual Periodic Rate
(a) Quarter (3 months)
(b) Month
(c) Six months
(d) Year
Answer:
Question 5. Match the calculation with the financial concept:
(i) Principal + Interest
(ii) Original Sum
(iii) Extra Payment
(iv) Duration
(a) Time
(b) Amount
(c) Interest
(d) Principal
Answer:
Simple Interest
Question 1. Match the terms in the simple interest formula with their representations:
(i) Principal
(ii) Rate (annual)
(iii) Time (in years)
(iv) Simple Interest
(a) $I$
(b) $R$ (or $r$)
(c) $T$ (or $n$)
(d) $P$
Answer:
Question 2. Match the simple interest calculation type with the relevant unit for time:
(i) Simple Interest per annum
(ii) Simple Interest per half-year
(iii) Simple Interest per quarter
(iv) Simple Interest per month
(a) Month
(b) Half-year (6 months)
(c) Quarter (3 months)
(d) Year
Answer:
Question 3. Match the simple interest problem description with the item being calculated:
(i) Find simple interest on $\textsf{₹}10,000$ at 8% for 3 years.
(ii) Find the amount if $\textsf{₹}5,000$ is invested at 6% for 2 years.
(iii) Find the rate if $\textsf{₹}4,000$ earns $\textsf{₹}400$ interest in 2 years.
(iv) Find the time if $\textsf{₹}8,000$ earns $\textsf{₹}1,200$ interest at 5%.
(a) Time
(b) Rate
(c) Simple Interest
(d) Amount
Answer:
Question 4. Match the amount descriptions with their simple interest components:
(i) Initial deposit
(ii) Extra money received
(iii) Total money at the end
(iv) Formula $P(1 + RT/100)$
(a) Amount
(b) Principal
(c) Interest
(d) Amount
Answer:
Question 5. Match the problem scenario with the element you would calculate:
(i) How much interest on a car loan?
(ii) Total to be repaid for a simple loan?
(iii) How long until money doubles?
(iv) What rate doubles money?
(a) Rate
(b) Amount
(c) Simple Interest
(d) Time
Answer:
Compound Interest
Question 1. Match the terms in the compound interest formula with their meanings:
(i) $P$
(ii) $r$ (or $i$)
(iii) $n$
(iv) $A$
(a) Number of compounding periods
(b) Accumulated Amount
(c) Periodic Interest Rate
(d) Principal
Answer:
Question 2. Match the compounding frequency with the number of periods per year ($m$):
(i) Annually
(ii) Semi-annually
(iii) Quarterly
(iv) Monthly
(a) $m=12$
(b) $m=1$
(c) $m=4$
(d) $m=2$
Answer:
Question 3. Match the calculation type with the interest calculation method:
(i) Interest only on principal
(ii) Interest on principal + accumulated interest
(iii) Linear growth of amount
(iv) Exponential growth of amount
(a) Compound Interest
(b) Simple Interest
(c) Compound Interest
(d) Simple Interest
Answer:
Question 4. Match the interest problem with the formula component being solved for:
(i) Find the total at the end of 5 years.
(ii) Find the interest rate if money doubles in 7 years.
(iii) Find the initial amount needed to reach a future value.
(iv) Find how long it takes for money to triple.
(a) Principal ($P$)
(b) Number of periods ($n$)
(c) Amount ($A$)
(d) Rate ($r$)
Answer:
Question 5. Match the compound interest scenario with the calculation needed:
(i) Initial deposit and final amount after 3 years.
(ii) Initial deposit and annual rate over 5 years.
(iii) Final amount and annual rate over 4 years.
(iv) Initial deposit, rate, and time.
(a) Calculate Future Value (Amount)
(b) Calculate Present Value (Principal)
(c) Calculate Rate
(d) Calculate Time
Answer:
Interest Rate Equivalency and Effective Rate
Question 1. Match the interest rate term with its description:
(i) Nominal Rate
(ii) Effective Rate
(iii) Periodic Rate
(iv) Compounding Frequency ($m$)
(a) The stated annual rate without considering within-year compounding.
(b) The actual annual rate earned or paid after accounting for compounding.
(c) The rate applied over the compounding period (e.g., monthly, quarterly).
(d) The number of times interest is compounded within a year.
Answer:
Question 2. Match the compounding frequency with its corresponding number of periods per year:
(i) Annual
(ii) Semi-annual
(iii) Quarterly
(iv) Monthly
(a) $m=2$
(b) $m=1$
(c) $m=12$
(d) $m=4$
Answer:
Question 3. Match the scenario with the appropriate interest rate concept for comparison:
(i) Comparing a loan at 8% p.a. simple vs. 7.8% p.a. compounded quarterly.
(ii) Stated rate on a fixed deposit compounded monthly.
(iii) Actual yield on a deposit accounting for daily compounding.
(iv) Rate used for calculating interest every six months from an annual rate.
(a) Periodic Rate
(b) Effective Rate
(c) Nominal Rate
(d) Effective Rate
Answer:
Question 4. Match the condition with the relationship between Nominal Rate ($r_{nom}$) and Effective Rate ($r_{eff}$):
(i) Compounding is annual ($m=1$).
(ii) Compounding is more than once a year ($m>1$, $r_{nom}>0$).
(iii) Nominal rate is 0%.
(iv) Comparing actual annual return on investments.
(a) $r_{eff} = r_{nom}$
(b) $r_{eff} > r_{nom}$
(c) Use Effective Rate
(d) $r_{eff} = 0\%$
Answer:
Question 5. Match the concept with its purpose:
(i) Nominal Rate Definition
(ii) Effective Rate Calculation
(iii) Interest Rate Equivalency
(iv) Periodic Rate Definition
(a) To find the true annual cost/return.
(b) To standardise rates for comparison.
(c) To specify the rate for a sub-annual period.
(d) To state the rate without accounting for compounding frequency.
Answer:
Time Value of Money: Present and Future Value
Question 1. Match the TVM term with its fundamental meaning:
(i) Present Value (PV)
(ii) Future Value (FV)
(iii) Discounting
(iv) Compounding
(a) Finding the value of money at a future point in time.
(b) Finding the value of a future cash flow in today's terms.
(c) The process of finding the PV of future cash flows.
(d) The process of finding the FV of present cash flows.
Answer:
Question 2. Match the TVM calculation with its formula structure:
(i) $FV = PV \times (1+r)^n$
(ii) $PV = FV / (1+r)^n$
(iii) PV of Multiple Cash Flows
(iv) FV of Multiple Payments
(a) Sum of PV of each individual cash flow.
(b) Future Value calculation.
(c) Present Value calculation.
(d) Annuity or series of uneven cash flows calculation.
Answer:
Question 3. Match the investment decision tool with its criterion for acceptance:
(i) Net Present Value (NPV)
(ii) Internal Rate of Return (IRR) (often used alongside NPV)
(iii) Payback Period (often used alongside NPV/IRR)
(iv) Discount Rate
(a) Project acceptable if it's less than a target period.
(b) Used to discount future cash flows.
(c) Project acceptable if greater than 0.
(d) Project acceptable if greater than the required rate of return.
Answer:
Question 4. Match the scenario with the relevant TVM concept:
(i) How much will $\textsf{₹}1,000$ be worth in 10 years?
(ii) How much is $\textsf{₹}10,000$ received in 5 years worth today?
(iii) Evaluating a project's profitability considering the cost of capital.
(iv) Investing a lump sum for future growth.
(a) Present Value
(b) Future Value
(c) NPV
(d) Future Value
Answer:
Question 5. Match the component in a TVM calculation with its typical influence:
(i) Higher Interest Rate
(ii) Longer Time Period
(iii) Higher Discount Rate
(iv) Lower Discount Rate
(a) Higher Future Value
(b) Lower Present Value
(c) Higher Future Value
(d) Higher Present Value
Answer:
Annuities: Introduction and Valuation
Question 1. Match the type of annuity with the timing of payments:
(i) Ordinary Annuity
(ii) Annuity Due
(iii) Perpetuity (Ordinary)
(iv) Deferred Annuity
(a) Payments start after a certain period.
(b) Payments occur at the beginning of each period.
(c) Payments occur at the end of each period.
(d) Payments occur at the end of each period, forever.
Answer:
Question 2. Match the annuity calculation formula with the value it determines:
(i) $Pmt \times \left[ \frac{(1+i)^n - 1}{i} \right]$
(ii) $Pmt \times \left[ \frac{1 - (1+i)^{-n}}{i} \right]$
(iii) PV of Ordinary Annuity $\times (1+i)$
(iv) FV of Ordinary Annuity $\times (1+i)$
(a) Future Value of an Ordinary Annuity
(b) Present Value of an Ordinary Annuity
(c) Present Value of an Annuity Due
(d) Future Value of an Annuity Due
Answer:
Question 3. Match the scenario with the relevant annuity calculation type:
(i) Saving a fixed amount monthly for a future goal.
(ii) Determining the lump sum received from future regular prize winnings.
(iii) Calculating fixed loan repayment amounts.
(iv) Evaluating the value of a rental agreement with payments upfront.
(a) Present Value of Ordinary Annuity
(b) Future Value of Ordinary Annuity
(c) Present Value of Annuity Due
(d) Finding Payment given PV (Annuity PV formula rearrangement)
Answer:
Question 4. Match the annuity term with its common real-world example:
(i) Ordinary Annuity
(ii) Annuity Due
(iii) Perpetuity
(iv) Finite Annuity
(a) Regular rent payments (from tenant perspective).
(b) Fixed term loan repayments (EMIs).
(c) Fixed pension payments received at the end of month.
(d) Perpetual bond interest payments.
Answer:
Question 5. Match the annuity value property with the condition:
(i) FV of Annuity Due vs. Ordinary Annuity
(ii) PV of Annuity Due vs. Ordinary Annuity
(iii) PV of Ordinary Annuity with $i>0$
(iv) FV of Ordinary Annuity with $i>0$
(a) The PV is less than the sum of all payments.
(b) The FV is greater than the sum of all payments.
(c) PV(Due) > PV(Ordinary)
(d) FV(Due) > FV(Ordinary)
Answer:
Special Financial Concepts: Perpetuity and Sinking Funds
Question 1. Match the special financial concept with its description:
(i) Perpetuity
(ii) Sinking Fund
(iii) Present Value of Perpetuity
(iv) Sinking Fund Contribution
(a) Regular deposits to accumulate a future sum.
(b) A series of equal payments that continue forever.
(c) The amount needed today to fund infinite future payments.
(d) The periodic payment required for a sinking fund.
Answer:
Question 2. Match the perpetuity concept with its formula:
(i) PV of Ordinary Perpetuity
(ii) Implied rate for a perpetuity ($i$)
(iii) Payment amount for a perpetuity ($Pmt$)
(iv) Relationship derived from PV of Annuity as $n \to \infty$
(a) $PV = Pmt / i$
(b) $Pmt = PV \times i$
(c) $i = Pmt / PV$
(d) Perpetuity formula
Answer:
Question 3. Match the application with the relevant concept:
(i) Valuing preferred stock with constant dividend
(ii) Saving for future debt repayment
(iii) Calculating the price of a consol bond (perpetual bond)
(iv) Setting aside funds for asset replacement
(a) Sinking Fund
(b) Perpetuity
(c) Perpetuity
(d) Sinking Fund
Answer:
Question 4. Match the factor with its impact on the PV of a perpetuity (assuming $Pmt > 0$):
(i) Increase in Payment Amount
(ii) Decrease in Interest Rate
(iii) Increase in Interest Rate
(iv) Decrease in Payment Amount
(a) Lower PV
(b) Higher PV
(c) Higher PV
(d) Lower PV
Answer:
Question 5. Match the fund/payment type with its cash flow direction (from the perspective of the entity managing the fund/loan):
(i) Sinking Fund
(ii) Loan Amortization (EMI)
(iii) Perpetuity (Income Received)
(iv) Perpetuity (Cost to Fund)
(a) Outflow (initial lump sum)
(b) Inflow (periodic payments)
(c) Inflow (periodic deposits)
(d) Outflow (periodic payments)
Answer:
Loans and Equated Monthly Installments (EMI)
Question 1. Match the loan concept with its definition:
(i) Principal
(ii) Loan Tenure
(iii) Interest
(iv) EMI
(a) The cost of borrowing money.
(b) A fixed periodic payment covering principal and interest.
(c) The initial amount borrowed.
(d) The duration over which the loan is repaid.
Answer:
Question 2. Match the EMI component trend over time with the part of the EMI:
(i) Decreases over loan tenure
(ii) Increases over loan tenure
(iii) Constant throughout tenure
(iv) Sum equals total loan amount
(a) Principal Component (sum)
(b) Interest Component (per payment)
(c) Principal Component (per payment)
(d) Total EMI Payment
Answer:
Question 3. Match the change in loan terms with the expected impact on EMI (assuming other factors constant):
(i) Higher Interest Rate
(ii) Longer Loan Tenure
(iii) Lower Principal Amount
(iv) Shorter Loan Tenure
(a) Higher EMI
(b) Lower EMI
(c) Lower EMI
(d) Higher EMI
Answer:
Question 4. Match the loan calculation concept with its purpose:
(i) EMI Calculation
(ii) Amortization Schedule
(iii) Total Interest Paid Calculation
(iv) Loan Amount Calculation (given EMI)
(a) To find the periodic repayment amount.
(b) To determine the total cost of borrowing.
(c) To find the principal loan amount affordable based on a fixed payment.
(d) To break down each payment into principal and interest.
Answer:
Question 5. Match the EMI input (annual basis) with the periodic value used in calculation (for monthly EMI):
(i) Annual Interest Rate (R)
(ii) Loan Tenure (N years)
(iii) Principal Loan Amount (P)
(iv) Compounding Frequency (monthly)
(a) $P$
(b) $R/12$
(c) 12 (for rate conversion)
(d) $N \times 12$
Answer:
Investment Returns and Growth Rate Metrics
Question 1. Match the return metric with its description:
(i) Absolute Return
(ii) Percentage Return
(iii) Nominal Rate of Return
(iv) Real Rate of Return
(a) Return adjusted for inflation.
(b) Total gain or loss in monetary value.
(c) Return expressed as a percentage of the initial investment.
(d) Stated return before considering inflation or compounding details.
Answer:
Question 2. Match the growth rate metric with its characteristic:
(i) Simple Average Return
(ii) CAGR
(iii) Percentage Return (single period)
(iv) Absolute Return
(a) Total gain or loss value.
(b) Geometric average annual growth rate.
(c) Useful for comparing investments with different durations.
(d) Arithmetic average of period returns.
Answer:
Question 3. Match the formula component in CAGR calculation with what it represents:
(i) End Value
(ii) Start Value
(iii) $n$
(iv) $(End Value / Start Value)^{1/n}$
(a) The initial value of the investment.
(b) The number of years.
(c) The final value of the investment.
(d) The average annual growth factor.
Answer:
Question 4. Match the investment scenario with the most appropriate return metric:
(i) Investment grew from $\textsf{₹}1,00,000$ to $\textsf{₹}1,20,000$ in one year.
(ii) Comparing the growth of two companies over a 7-year period.
(iii) Portfolio value changed by $\textsf{₹}50,000$.
(iv) Comparing an FD rate with a recurring deposit return over multiple years.
(a) Absolute Return
(b) Percentage Return
(c) CAGR
(d) CAGR
Answer:
Question 5. Match the outcome with the CAGR value:
(i) Investment value doubled in 5 years.
(ii) Investment value decreased over the period.
(iii) Investment value remained unchanged.
(iv) Investment value increased over the period.
(a) CAGR > 0
(b) CAGR < 0
(c) CAGR = 0
(d) CAGR $\approx 14.87\%$
Answer:
Asset Depreciation
Question 1. Match the depreciation term with its definition:
(i) Depreciation
(ii) Useful Life
(iii) Salvage Value
(iv) Book Value
(a) Estimated remaining value at the end of use.
(b) Allocation of asset cost over its life.
(c) Cost minus accumulated depreciation.
(d) Estimated period an asset will be used.
Answer:
Question 2. Match the Straight-Line Depreciation formula component with its input:
(i) Numerator
(ii) Denominator
(iii) Cost - Salvage Value
(iv) Annual Depreciation
(a) Useful Life
(b) Depreciable Amount
(c) Depreciable Amount / Useful Life
(d) Depreciable Amount
Answer:
Question 3. Match the concept with its typical accounting treatment:
(i) Annual Depreciation Expense
(ii) Accumulated Depreciation
(iii) Book Value
(iv) Original Cost of Asset
(a) Appears on the Balance Sheet as a reduction from asset cost.
(b) Appears on the Balance Sheet as the initial recorded value.
(c) Appears on the Income Statement.
(d) Appears on the Balance Sheet as the net value.
Answer:
Question 4. Match the depreciation method characteristic with the method:
(i) Depreciation is constant each year.
(ii) Book value reaches salvage value at end of life.
(iii) Most common method for simplicity.
(iv) Depreciation calculation uses Cost, Salvage Value, and Useful Life.
(a) Straight-Line Method
(b) Straight-Line Method
(c) Straight-Line Method
(d) Straight-Line Method
Answer:
Question 5. Match the asset's value state with the depreciation outcome:
(i) Beginning of Useful Life
(ii) End of Useful Life
(iii) During Useful Life
(iv) Asset Sold for less than Book Value
(a) Book Value equals Salvage Value.
(b) Book Value equals Original Cost.
(c) Loss on Sale.
(d) Accumulated Depreciation is increasing.
Answer:
Taxation: Concepts and Calculations
Question 1. Match the tax type with its characteristic:
(i) Direct Tax
(ii) Indirect Tax
(iii) Progressive Tax
(iv) Taxable Income
(a) Tax rate increases with income.
(b) Tax burden is borne by the payer.
(c) Income subject to tax after deductions.
(d) Tax burden can be shifted to the consumer.
Answer:
Question 2. Match the tax with its example in India:
(i) Direct Tax
(ii) Indirect Tax
(iii) Tax on Income
(iv) Tax on Goods and Services
(a) Income Tax
(b) GST
(c) GST
(d) Income Tax
Answer:
Question 3. Match the income tax concept with its description:
(i) Gross Total Income
(ii) Deductions
(iii) Tax Slabs
(iv) Tax Liability
(a) The total amount of tax payable.
(b) Allowable reductions from income to arrive at taxable income.
(c) Total income from all sources before deductions.
(d) Income ranges subject to different tax rates.
Answer:
Question 4. Match the GST calculation component with its source:
(i) GST on Sales (Output Tax)
(ii) GST on Purchases (Input Tax)
(iii) Input Tax Credit (ITC)
(iv) Net GST Payable
(a) Output Tax - ITC
(b) Tax paid on inputs, available for credit.
(c) Tax collected on outward supplies.
(d) Credit available against output tax liability.
Answer:
Question 5. Match the tax rate with the base it is applied to:
(i) Income Tax Rate
(ii) GST Rate
(iii) Effective Tax Rate (Income Tax)
(iv) Average GST Rate on a product
(a) Taxable Income
(b) Total Tax / Gross Total Income
(c) Transaction Value (Price before GST)
(d) GST Amount / Price before GST
Answer:
Bill Calculations and Interpretation
Question 1. Match the bill component with what it charges for:
(i) Usage Charge
(ii) Fixed Charge
(iii) Tariff Rate
(iv) Surcharge
(a) Price per unit of consumption.
(b) Additional fee for specific reasons (e.g., late payment, fuel cost).
(c) Costs not directly related to consumption (e.g., meter maintenance).
(d) The quantity of utility consumed multiplied by the rate.
Answer:
Question 2. Match the utility with its common unit of measurement for billing usage:
(i) Electricity
(ii) Water Supply
(iii) Piped Natural Gas (PNG)
(iv) Broadband Internet (data usage)
(a) Litres or Cubic Meters
(b) Gigabytes (GB)
(c) Kilowatt-hours (kWh)
(d) Standard Cubic Meters (SCM)
Answer:
Question 3. Match the calculation step with the component of an electricity bill (tiered tariff):
(i) Previous Reading - Present Reading
(ii) (Present Reading - Previous Reading)
(iii) Sum of charges for different consumption blocks
(iv) Energy Charge + Fixed Charge + Taxes
(a) Total Bill Amount
(b) Error (order incorrect)
(c) Usage / Consumption
(d) Total Energy Charge
Answer:
Question 4. Match the bill term with its significance:
(i) Billing Period
(ii) Due Date
(iii) Arrears
(iv) Total Amount Due
(a) Unpaid amount from previous bills.
(b) The date by which payment is required to avoid penalties.
(c) The duration covered by the bill.
(d) The final sum to be paid.
Answer:
Question 5. Match the purpose with the action related to bill interpretation:
(i) Checking Meter Readings
(ii) Analysing Usage Pattern
(iii) Reviewing Tariff Rates
(iv) Identifying Extra Charges
(a) To understand how consumption influences cost per unit.
(b) To verify calculated consumption is correct.
(c) To identify potential unexpected fees or penalties.
(d) To find out when and how you use the utility most.
Answer: