Week 4

FINANCE AREA
Placement Preparedness Workbook

Week 4 Financial Mathematics &
Accounting Fundamentals
Due Date: 12/02/2024
Student Name(Section): USN:

Submitted to: Submission Date:
Workbook Guidelines
 Module Release and Completion: Every Thursday, a new module will be released for
your study and completion. Take ample time to understand and answer the questions
within the provided module.
 Submission Protocol: It is mandatory to submit your completed assignments to your

respective group leader by the following Monday after the module's release. Ensure that
your submissions are timely and thorough.
 Submission Format: All answers and completed assignments should be neatly compiled
in the format provided. Please ensure clarity and organization in your responses.
 Submission to Group Leaders: Your group leader, identified by the respective faculty
member, will collect and manage the submissions on behalf of your group. Ensure you
hand in your completed workbook to them within the stipulated timeframe.
 Placement Eligibility Test: In September, an important Placement Eligibility Test will

be conducted. Questions for this test will be drawn from the modules covered in the
workbook. Hence, dedicating your time and effort to completing the workbook diligently
will greatly assist in your preparation for this test.
Time value of money formulae
Values to be found out Formula
Rule of 72 72
Years to Double =
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
Rule of 69 69
Years to Double = + 0.35
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
Future Value of a Single Flow 𝐹𝑉𝑛 = 𝑃𝑉(1 + 𝑟)𝑛
Present Value of a Single Flow 𝐹𝑉 𝐹𝑉

𝑃𝑉 = =
𝐹𝑉𝐼𝐹(𝑟, 𝑛) (1 + 𝑟)𝑛
Future Value of an Annuity [(1 + 𝑟)𝑛 − 1]

𝐹𝑉𝐴 = 𝐴 ∗ [ ]
𝑟
1
[1 − ]
Present Value of an Annuity (1 + 𝑟)𝑛
𝑃𝑉𝐴𝑛 = 𝐴 ∗
𝑟
𝐴
Present Value of a Perpetuity 𝑃𝑉of a Perpetuity =
𝑟
𝑟 𝑚𝑛
𝐹𝑉𝑛 = 𝑃𝑉 (1 + )
Intra-year Compounding and 𝑚
Discounting
𝐴
Present Value of a Perpetuity 𝑃𝑉of a Perpetuity =
𝑟
𝑟 𝑚𝑛
𝐹𝑉𝑛 = 𝑃𝑉 (1 + )
Intra-year Compounding 𝑚
𝑛
𝑐𝑡
𝑁𝑃𝑉 = ∑ − 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
(1 + 𝑟)𝑡
𝑡=1
𝑛
𝑐𝑡
∑
+ 𝑟)𝑡
𝑡=1 (1
Benefit − Cost Ratio =
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
𝑛
𝑐𝑡
∑
𝑡=1 (1 + 𝑟)𝑡
Net benefit − Cost Ratio = −1
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
Internal Rate of Return (IRR) is the value of “r” in the following equation:
𝑛
𝑐𝑡
∑ = 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
(1 + 𝑟)𝑡
𝑡=1
The decision rule for IRR is: Accept if IRR is greater than the cost of capital, and Reject
if IRR is less than the cost of capital.
Average AnnualProfits(after depn and taxes)
Average Rate of Return = ( ) ∗ 100
Net Investment in the Project
Decision rule:
NPV BCR or PI NBCR Rule

Positive >1 >0 Accept
Zero =1 =0 Indifferent
Negative <1 <0 Reject
1. Raju borrowed Rs. 12500 at 12% per annum for 8 months. 2 months later, he had to go
abroad, and his lender agreed to settle by discounting the loan at 14%. Then he has to pay
(a) Rs. 13500
(b) Rs. 13000
(c) Rs. 12616.82
(d) Rs. 13192.18
2. The discount rate for Rs. 7000 loan for 60 days (take 360 days in a year) if the borrower gets
Rs. 6790 is
(a) 18%
(b) 3%
(c) 18.55%
(d) 17%
3. The term of discount for Ravi if he receives proceeds of Rs. 9850 for a 6% loan of Rs. 10000
is
𝟏
(a) of a year
𝟒
𝟏
(b) of a year
𝟐
𝟐
(c) of a year
𝟑
𝟏
(d) 𝟑 of a year
4. John borrowed Rs. 20000 from Nash at 7% interest to be matured in 120 days (take 360
days in a year), and he signed a promissory note to that effect. But Nash needed cash for
an emergency only 45 days later, and he could not wait until John could pay him back. He
took the promissory note to his local bank and discounted it at 9 % discount rate. The total
cash received by him from the bank, and the amount bank make from this transaction is
(a) Rs. 24666.67, Rs. 4625
(b) Rs. 20466.67, Rs. 383.75
(c) Rs. 20082.92, Rs. 82.92
(d) Rs. 20466.67, Rs. 466.67
5. The current value of Rs. 2000 at interest rate of 8.25 % compounded annually for 3 years
is
(a) Rs. 2536.96
(b) Rs. 1576.69
(c) Rs. 2495
(d) Rs. 1505
6. The discount factor and current value of Rs. 3800 at 6.5% for 8 years is
(a) 1.655, Rs. 3568
(b) 1.655, Rs. 2295.2
(c) 0.604, Rs. 3568
(d) 0.604, Rs. 2295.2
7. If the nominal rate of interest stated is 8%, the effective interest rate will be if the
compounding occurs weekly is
(a) 8.32%
(b) 8.41 %
(c) 8.21 %
(d) 8.11 %
8. A fund of Rs. 56000, compounded continuously at a rate of 6.5 %, will be received in 30

months. The cash receive if it were cashed today is
(a) Rs. 48200.62

(b) Rs. 47600.90
(c) Rs. 7967.35
(d) Rs. 48032.65
9. Sami borrowed Rs. 90000 for 18 months at an annual simple interest of 8%. The payoff
value is
(a) Rs. 50400
(b) Rs. 10080
(c) Rs. 100800
(d) Rs. 504000
10. Ram will need to have Rs. 20500 in 3 and half years. At present he has only Rs. 9500 in his
savings account. The simple interest rate that would allow him to collect Rs. 20500 after 3
and half years is
(a) 17.58 %
(b) 20.88 %
(c) 26.58 %
(d) 33.08%
91. Differentiate between finance & accounting.
92. Distinguish between fixed assets and current assets.
93. What is the significance of accounting standards?

94. Distinguish between financial accounting, cost accounting and management accounting.
95. Differentiate between finance and commerce.
96. Differentiate between assets, liabilities and shareholders’ capital.

97. What are the different types of ledger?
98. What is IFRS?
99. What do you understand by window dressing in accounting? Is it good or bad?

100. Discuss types of Inventory methods used in accounting.
101. Explain conservatism concept.
102. Pass journal entries for discount received and tax deducted at source.
103. Explain GAAP.
104. What are the Systems of Accounting?
105. What is contingent liability? Is it shown in the balance sheet? If yes, how?
106. What is capital reserve?
107. What is difference between revenue reserve and general reserve?
108. Explain difference between depreciation and depletion.

109. Discuss treatment of goodwill, and good will written off.
110. Pass journal entry for depreciation and preliminary expenses.
111. Explain Accounting principles.

112. Why do you create provisions?

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FINANCE AREA

Placement Preparedness Workbook

Student Name(Section): USN:

 Submission Protocol: It is mandatory to submit your completed assignments to your

 Placement Eligibility Test: In September, an important Placement Eligibility Test will

Future Value of a Single Flow 𝐹𝑉𝑛 = 𝑃𝑉(1 + 𝑟)𝑛

Present Value of a Single Flow 𝐹𝑉 𝐹𝑉

Future Value of an Annuity [(1 + 𝑟)𝑛 − 1]

NPV BCR or PI NBCR Rule

8. A fund of Rs. 56000, compounded continuously at a rate of 6.5 %, will be received in 30

(a) Rs. 48200.62

92. Distinguish between fixed assets and current assets.

93. What is the significance of accounting standards?

95. Differentiate between finance and commerce.

96. Differentiate between assets, liabilities and shareholders’ capital.

98. What is IFRS?

99. What do you understand by window dressing in accounting? Is it good or bad?

101. Explain conservatism concept.

104. What are the Systems of Accounting?

107. What is difference between revenue reserve and general reserve?

108. Explain difference between depreciation and depletion.

110. Pass journal entry for depreciation and preliminary expenses.

111. Explain Accounting principles.

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