Test Index

Time Value of Money

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Question : 24 of 99

Marks: +1, -0

Mohan deposits

\text{Rs. } 500

into an account paying

8\%

simple interest. He makes two more deposits of

\text{₹} 1,000

each; first after 3 months and second after 6 months. How much will be in his account at the end of the year, if he makes no other deposits and withdrawals during the time?

$\text{Rs. }2,600$
$\text{Rs. } 2,650$
$\text{Rs.} 2,640$
None

Solution:

Concept:

Simple interest is calculated on each deposit for the time it remains in the account.

Explanation:

• Deposit 1: ₹500 at start, for 1 year.

Interest =

500 \times 0.08 \times 1 = 40

.

Amount =

500 + 40 = 540

.

• Deposit 2: ₹1000 after 3 months (0.25 yr), remaining time = 9 months = 0.75 yr.

Interest =

1000 \times 0.08 \times 0.75 = 60

.

Amount =

1000 + 60 = 1060

.

• Deposit 3: ₹1000 after 6 months (0.5 yr), remaining time = 6 months = 0.5 yr.

Interest =

1000 \times 0.08 \times 0.5 = 40

.

Amount =

1000 + 40 = 1040

.

Total =

540 + 1060 + 1040 = 2640

.

Answer:

₹2,640

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