Analyzing previous year’s questions of the Time Value of Money (TVM) topic is crucial for RBI Grade B aspirants. It allows you to understand the question types and their difficulty level, allowing you to tailor your RBI Grade B preparation strategy accordingly.
Also, by practicing actual questions of TVM asked in the RBI Grade B exam in previous years, you can boost your confidence to tackle Time Value of Money questions in the upcoming RBI Grade B exam.
Below, we have given the questions of Time Value of Money (TVM) asked in the previous RBI Grade B exams along with their explanations.
RBI Grade B Time Value of Money Questions
Here are the questions from the Time Value of Money (TVM) topic asked in the previous RBI Grade B exams:
TVM Question 1 (RBI Grade B 2017)
Which of the following is not an example of annuity?
A. Monthly Rental payments
B. Quarterly income from Markets
C. Semi-annual interest payments on a savings Bank account
D. One-time lump sum payment for a car
E. None of the above
Click here for the explanation.
TVM Question 2 (RBI Grade B 2017)
A person has deposited Rs 250 in the bank and he got compound interest at a certain rate of interest. What would be the rate of return, if Rs 250 gets converted into 1000 in 16 Years?
A. 8%
B. 7%
C. 9%
D. 6%
E. None of the above.
Click here for the explanation.
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TVM Question 3 (RBI Grade B 2017)
An amount of 1000 at 8% becomes 2000, find the number of years required using the rule of 72.
A. 7 Years
B. 8 Years
C. 9 Years
D. 8.5 Years
E. None of the above
Click here for the explanation.
TVM Question 4 (RBI Grade B 2017)
Suppose you invest 5000 at the end of each year for the next 5 years with an interest rate of 5%. What would be the total value of money at the end of 5 years? Assume the future value of the annuity factor at a 5% interest rate for 5 years to be 5.52.
A. 24400
B. 27600
C. 25500
D. 28300
E. None of the above
Click here for the explanation.
RBI Grade B Time Value of Money: Answer Key
Here is the answer key of the above Time Value of Money questions:
| RBI Grade B Time Value of Money PYQs Answer Key | |
| Question | Answer |
| Question 1 | Option D |
| Question 2 | Option C |
| Question 3 | Option C |
| Question 4 | Option B |
Before reviewing the explanations, assess your performance. If you struggled to answer the above questions correctly, it indicates that your understanding of the Time Value of Money fundamentals needs strengthening.
Click on the link, “RBI Grade B Time Value of Money Concepts”, to reinforce your understanding of TVM concepts.
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RBI Grade B Time Value of Money: Explanation
Here are the explanations of the Time Value of Money questions asked in the RBI Grade B exams:
Explanation 1
An annuity is defined as a series of equal cash flows that occurs every period i.e., at equal time intervals for a finite number of periods It may occur at the beginning of the Period or Ending of the Period. The goal of an annuity is to provide a steady stream of income, typically during retirement.
Annuities are intended as income-generating products and are not typically meant for capital appreciation. Annuities are therefore best suited for individuals who want to add retirement income later on, or who wish to convert a large lump sum into a guaranteed stream of cash flows over time.
If Every Cash Flow occurred at the beginning of the Period, then it is called Annuity Due and If Every Cash Flow occurred at Ending of the Period, then it is called Ordinary Annuity.
Therefore, the correct answer will be option D.
Explanation 2
Here, Rs. 250 got converted into Rs. 1000 in 16 years which means that the initial amount has quadrupled (4x) in 16 years. Thereby, we can apply the rule of 144 and get the rate of interest.
Use formula, 144/N = R, where N is the number of years and R is the rate of return, in the question N is 16 years, so when you substitute the value, it will be 144/16 = 9%.
Thereby the correct answer will be option C.
Explanation 3
The question is very direct, and apply the formula for rule of 72, which can be expressed as below
Rate of Interest (r) = 72/Number of years (n), here R is 8%, substitute the values, you will get
Number of years = 72/8 = 9 Years.
Thereby the correct answer will be option C.
Explanation 4
This question is based on the formula of Future value of annuity, which is
Future value of annuity = Present value * FVAF for 5 years at 5% rate of Interest.
FVAF is short for, Future value of annuity factor, which is given in the question, as 5.52. So, future value of annuity = 5000*5.52 = 27600.
Therefore the correct answer will be option B.
Click on the link, “RBI Grade B Time Value of Money Practice Questions”, to practice more Time Value of Money-related questions to improve your speed and accuracy.
Click on the link, “RBI Grade B Time Value of Money PYQs” to download the above-mentioned Time Value of Money PYQs in a PDF format.
Conclusion
On this page, we have compiled the previous year questions of Time Value of Money topic asked in the RBI Grade B exam along with their answers. Additionally, we have provided detailed explanation of each question.
- Eligibility
- Pattern
- Syllabus
- Solved PYQs
- Strategy
