Tap here to pick an attempt, marks or topic, and to sort. It makes finding questions easy!
16
December 2025Q. 6A(i)5 marksSyllabus 2022
( i )What is the Rule of 69 in the context of the doubling period ? Mention any two benefits and two limitations of this rule.
According to the Rule of 69, the doubling period is equal to: 0.35 + (69/Interest Rate)
Example: If interest rate is 10%, the doubling period will be: 0.35 + (69 /10) = 7.25 years
The following are the benefits of the rule of 69.
l It assumes that the interest is continuously compounding. In fact, it is true to think in the case of equity valuation that is compounding on an instant basis.
l It provides an answer very close to the answer obtained by using a financial calculator.
l It is even considered the thumb rule of the investment return generating a cycle.
l Easy to calculate the time required.
l Even the retail investor or a non-finance person can easily determine the result.
l Can be used by any person without understanding the pure logic.
l Faster decision making and improve thought process.
The following are the limitations of the rule of 69.
l Difficult to explain the logic behind the number 69.
l Rule 69 does not apply to everything. Only the security like equity, which is compounding every minute, can provide the exact value.
l If the rate is too less like 2/3 % Per annum, than the result is not very accurate. Generally, the higher rate is well captured by this formula.
l Projects with a heavy investment need specially designed spreadsheets because a minuscule difference in time and rate of interest value can create a difference of millions.
l Difficult to absorb the value derived because of non-transparency of value derivation.
l This rule covers those instruments which compounds continuously like equity shares, but it ignores the dividend component which is also received by the equity holder, so overall the share did not increase by an exact multiple of 2, but the dividend amount makes the value of it.
Source: ICSI Guideline Answers, December 2025, Q. 6A(i) (Syllabus 2022).
June 2025Q. 6(c)5 marksSyllabus 2022
(c)Rita wants to invest her savings in certain annuity plans. Amount to be invested is ₹ 2,00,000 per annum for next five years. The investment is expected to compound at 10% p.a. Calculate future value :
(i)Assuming investments are made at the end of year.
(ii)Assuming investments are made at the beginning of year.
(i)Assuming investment made at end of year
Future Value =
Investment x
[(1 + return%) N – 1]
Return %
Future Value =
₹ 2,00,000 x
[(1 + 10%) 5 – 1]
=
₹ 12,21,020/-
10%
(ii)Assuming investment made at beginning of year
Future Value
= Investment x
((1 + return%) N – 1)
x
(1+r)
Return %
Future Value
= ₹ 2,00,000 x
[(1 + 10%) 5 – 1] x (1+10%)
=
₹ 13,43,122/-
10%
Source: ICSI Guideline Answers, June 2025, Q. 6(c) (Syllabus 2022).
December 2024Q. 98 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Assume that a deposit to be made at year zero into an account that will earn 8% compounded annually. It is desired to withdraw ₹ 6,000 three years from now and ₹ 8,000 six years from now. What is the size of the year zero deposit that will produce these further payment. (PV factor 8% for 3 year = 0.794 and PV factor 8% for 6 year = 0.630).
(A)₹ 9,810
(B)₹ 9,804
(C)₹ 9,814
(D)₹ 9,800
Answer: (B) ₹ 9,804
Source: ICSI Guideline Answers (answer key), December 2024, Q. 98 (Corporate and Management Accounting paper, Syllabus 2017).
December 2024Q. 3 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Under inflationary conditions the value of money, expressed in terms of its purchasing power over goods and services :
(A)Declines
(B)Increases
(C)Remains constant
(D)None of the above
Answer: (A) Declines
Source: ICSI Guideline Answers (answer key), December 2024, Q. 3 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 4 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Ashish wants to retire presently and receive ₹ 4,000 a month. He wants to pass this monthly payment to future generations after his death. He can earn an interest of 8% compounded annually. How much ₹ will he need to set aside to achieve this perpetuity goal ?
(A)5,79,900
(B)5,90,000
(C)6,00,000
(D)5,70,000
Answer: (C) 6,00,000
Source: ICSI Guideline Answers (answer key), December 2024, Q. 4 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 5 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
A sum of ₹ 60,000 is invested @ 12% p.a. for 6 years. What will be the present value of its maturity value (‘), assuming a discount rate of return of 10% ?
(A)66,800
(B)69,805
(C)1,03,200
(D)1,18,440
Answer: (A) 66,800
Source: ICSI Guideline Answers (answer key), December 2024, Q. 5 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 55 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following risks can be controlled by an organization ?
(A)Inflationary Risk
(B)Market Risk
(C)Interest Rate Risk
(D)Financial Risk
Answer: (D) Financial Risk
Source: ICSI Guideline Answers (answer key), December 2024, Q. 55 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 6A(i)5 marksSyllabus 2022
(i)Write a short note on Present Value of Annuity.
Present Value of an Annuity
The present value of an annuity is the current value of future payments from an annuity, given a specified rate of return, or discount rate. The higher the discount rate, the lower the present value of an annuity.
Key points:
l The present value of an annuity refers to how much money would be needed today to fund a series of future annuity payments.
l A sum of money received today is worth more than the same sum at a future date because of time value of money.
l Present value calculation can be used to determine whether more money will be received by taking a lumpsum payout now or an annuity spread out over a number of years.
The formula to compute Present Value of an Annuity is as under:
Present Value of an annuity (P) = PMT x 1- (1/1+r) n r
Where:
PMT = Monetary value of each annuity payment
r = Interest rate (also known as discount rate)
n = Number of periods in which payments will be made
Source: ICSI Guideline Answers, December 2024, Q. 6A(i) (Syllabus 2022).
December 2023Q. 6A(iii)5 marksSyllabus 2022
(iii)What is meant by annuity due and ordinary annuity ?
Annuity Due vs. Ordinary Annuity
1.Payments : The major difference between annuity due and the more popular ordinary annuity is that payments for an ordinary annuity are made at the end of the period, as opposed to annuity due payments made at the start of each period/interval. Ordinary annuity payments include loan repayments, mortgage payments, bond interest payments, and dividend payments.
2.Present value : Another difference is that the present value of an annuity due is higher than one for an ordinary annuity. It is a result of the time value of money principle, as annuity .due payments are received earlier.
Hence, if you are set to make ordinary annuity payments, you will benefit from getting an ordinary annuity by holding onto your money longer (for the interval). Conversely, if you are set to receive annuity due payments, you will benefit, as you will be able to receive your money
(value)sooner. In any annuity due, each payment is discounted one less period in contrast to a
similar ordinary annuity.
Source: ICSI Guideline Answers, December 2023, Q. 6A(iii) (Syllabus 2022).
June 2023Q. 6 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
You have ₹ 9,000 to deposit. ABC Bank offers 12 percent per year compounded monthly, while Kings Bank also offers 12 percent per year, but will only compound annually. How much will your investment be worth in 10 years at each bank respectively ?
(A)₹ 29,703.48 and ₹ 27,952.63
(B)₹ 27,952.63 and ₹ 26,703.48
(C)₹ 28,703.48 and ₹ 26,952.63
(D)₹ 29,952.63 and ₹ 28,703.48
Answer: (A) ₹ 29,703.48 and ₹ 27,952.63
Source: ICSI Guideline Answers (answer key), June 2023, Q. 6 (Financial and Strategic Management paper, Syllabus 2017).
June 2023Q. 7 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
₹ 2,000 is invested at the end of each month in an account paying interest 6% per year compounded monthly. What is the approximate amount/value of this investment after 10th payment ?
(A)₹ 21,220
(B)₹ 20,360
(C)₹ 20,450
(D)₹ 20,580
Answer: (C) ₹ 20,450
Source: ICSI Guideline Answers (answer key), June 2023, Q. 7 (Financial and Strategic Management paper, Syllabus 2017).
December 2022Q. 14 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
A wants to invest ₹ 10,000 for a period of 3 years. The rate of return on amount to be invested is 10% p.a. compounded annually. By how much amount the return will differ approximately, if the rate of return been 10% p.a. compounded quarterly ?
(A)₹ 130
(B)₹ 140
(C)₹ 150
(D)₹ 160
Answer: (B) ₹ 140
Source: ICSI Guideline Answers (answer key), December 2022, Q. 14 (Financial and Strategic Management paper, Syllabus 2017).
December 2022Q. 15 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
What is the future value of an annuity amount of ₹ 2,000 payable at the beginning of each of the next 5 years, if the rate of return is 10% p.a. ?
(A)₹ 13,410 approx.
(B)₹ 11,230 approx.
(C)₹ 12,210 approx.
(D)₹ 11,110 approx
Answer: (C) ₹ 12,210 approx.
Source: ICSI Guideline Answers (answer key), December 2022, Q. 15 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 4 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The present value of ₹ 1,00,000 to be received 3 years later when rate of return is 10% p.a. compounded annually is :
(A)₹ 75,131
(B)₹ 86,153
(C)₹ 72,900
(D)₹ 70,000
Answer: (A) ₹ 75,131
Source: ICSI Guideline Answers (answer key), June 2022, Q. 4 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 5 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
A deposited ₹ 1,00,000 in a bank for a period of 5 years and the rate of interest is 5% p.a. compounded annually. How much amount A will receive after 5 years?
(A)₹ 1,25,000
(B)₹ 1,27,628
(C)₹ 1,32,525
(D)₹ 1,02,763
Answer: (B) ₹ 1,27,628
Source: ICSI Guideline Answers (answer key), June 2022, Q. 5 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 19 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
What will be the approx. present value of an annuity of ₹ 25,000 to be received at the end of each of the next 5 years, if the discount rate is 12% ?
(A)₹ 80,000
(B)₹ 90,000
(C)₹ 95,000
(D)₹ 98,000
Answer: (B) ₹ 90,000
Source: ICSI Guideline Answers (answer key), June 2022, Q. 19 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 9 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Find the amount of an annuity if payment of ₹ 50,000 is made annually for 7 years at interest rate of 14% compounded annually.
(A)₹ 5,36,000
(B)₹ 5,35,000
(C)₹ 5,36,500
(D)₹ 5,35,000
Answer: (C) ₹ 5,36,500
Source: ICSI Guideline Answers (answer key), June 2021, Q. 9 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 7 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The present value of ₹ 1,000 to be received after one year at the rate of 8% per annum is ₹ 926, if discounted half yearly, the present value would be :
(A)₹ 924.55
(B)₹ 930.00
(C)₹ 600.96
(D)₹ 934.00
Answer: (A) ₹ 924.55
Source: ICSI Guideline Answers (answer key), December 2020, Q. 7 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 8 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
What is the present value of the maturity value of ₹ 10,000 which has been given on 15% interest for five years while required rate of return is 10% ? (FV @ 15% after 5 years is 2.01136, FV @ 10% after 5 years is 1.61051)
(A)₹ 12,488.94
(B)₹ 12,494.88
(C)₹ 21,494.88
(D)₹ 21,488.94
Answer: (A) ₹ 12,488.94
Source: ICSI Guideline Answers (answer key), December 2020, Q. 8 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 86 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
A deposit to be made on 1st January, 2020, into bank that will earn an interest of 7% compound annually. It is desired to withdraw ₹ 60,000 on 31st December, 2023 and ₹ 1,00,000, on 31st December, 2025. The amount to be deposited on
1st January, 2020, will be ........... (PVF
= 0.7629; PVF
=
7% for 4 years
7% for 6 years
0.6663) :
(A)₹ 1,30,608
(B)₹ 1,12,404
(C)₹ 1,22,063
(D)₹ 1,09,582
Answer: (B) ₹ 1,12,404
Source: ICSI Guideline Answers (answer key), December 2019, Q. 86 (Corporate and Management Accounting paper, Syllabus 2017).
December 2019Q. 2 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
What will be the maturity value of a sum of ₹ 18,000 invested today at the rate of 5% p.a. for 10 years ?
(A)₹ 29,360
(B)₹ 28,320
(C)₹ 29,320
(D)₹ 35,220
Answer: (C) ₹ 29,320
Source: ICSI Guideline Answers (answer key), December 2019, Q. 2 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 6 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Given that the effective rate of interest is 9.31% p.a., what is the nominal rate of interest p.a., if compounding is carried out quarterly ?
(A)9.25%
(B)8.5%
(C)9%
(D)9.20%
Answer: (C) 9%
Source: ICSI Guideline Answers (answer key), December 2019, Q. 6 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 13 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
An interest rate that has been annualized using compound interest is termed as:
(A)Annual interest rate.
(B)Discounted interest rate.
(C)Effective annual interest rate.
(D)Simple interest rate.
Answer: (C) Effective annual interest rate.
Source: ICSI Guideline Answers (answer key), December 2019, Q. 13 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 18 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
......................... is the present value of an asset, if the annual cash inflow is ₹ 1,000 per year for next 5 years and the discount rate is 15%.
(A)₹ 2,500
(B)₹ 3,500
(C)₹ 3,352
(D)₹ 2,481
Answer: (C) ₹ 3,352
Source: ICSI Guideline Answers (answer key), December 2019, Q. 18 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 20 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The effective rate of interest for a sum of money compounded quarterly is 12.55%. What is its nominal yield ?
(A)12.05%
(B)12.25%
(C)12.15%
(D)12%
Answer: (D) 12%
Source: ICSI Guideline Answers (answer key), December 2019, Q. 20 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 21 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The price of a share is ₹ 100 today. It grows to ₹ 125 at the end of the 1st year, ₹ 187.5 at the end of the 2nd year and ₹ 243.75 at the end of the 3rd year. What is the average rate of return ?
(A)35.5%
(B)35%
(C)34.5%
(D)34%
Answer: (B) 35%
Source: ICSI Guideline Answers (answer key), December 2019, Q. 21 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 22 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
What is the present value of an annuity of ₹ 15,000 starting immediately (t = 0) and paying another 5 annual instalments ? Assume a discounting rate of 12%.
(A)₹ 85,460
(B)₹ 82,500
(C)₹ 75,120
(D)₹ 88,120
ICSI did not treat any of the given options as correct.
ICSI's note: None of the option is correct. The correct answer is ₹ 69072. [15000 + 15000 x (PVAF12%,5) or (15000 + 15000 x 3.6048)].
Source: ICSI Guideline Answers (answer key), December 2019, Q. 22 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 25 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
If an investment of ₹ 3,00,000 pays ₹ 25,000 p.a. in perpetuity, what is the Net Present Value, if the interest rate is 9% ?
(A)₹ –22222
(B)₹ +22222
(C)₹ +24736
(D)₹ +27250
Answer: (A) ₹ –22222
Source: ICSI Guideline Answers (answer key), December 2019, Q. 25 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 56 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
A sum of ₹ 50,000 is invested @ 12% p.a. for 6 years. What will be the present value of its maturity value, assuming a required rate of return of 10% ?
(A)₹ 86,000
(B)₹ 98.700
(C)₹ 55,667
(D)₹ 56,504
Answer: (C) ₹ 55,667
Source: ICSI Guideline Answers (answer key), December 2019, Q. 56 (Financial and Strategic Management paper, Syllabus 2017).
June 2019Q. 4(a) (FSM)8 marksFinancial and Strategic Management paper, Syllabus 2017
(a)ABC Ltd. is a firm that specializes in providing software services to its clients. In order to augment its time-share computer services to its clients, the firm is considering the purchase of an additional computer.
In this context, it has two alternatives, as mentioned below :
(i)Purchasing the computer in lieu of making a payment of ₹ 24,00,000.
(ii)Entering into a lease agreement with a company with the following necessary terms and conditions :
(a)The computer has to be leased for a period of 3 years for ₹ 6,00,000 as annual lease rent in addition to 15% of the revenue accruing from gross
time-share service.
(b)An additional payment of ₹ 5,00,000 needs to be done at the end of the third year.
(c)Payments as lease rent need to be made at the year end.
(d)After the completion of the specified period in the contract, the computer needs to be handed back to the lessor.
As per the company estimates, the computer under review, presently will have a worth of ₹ 12 lakhs at the end of the third year with the forecast revenues as follows :
Year
₹
1
24,00,000
2
25,50,000
3
28,00,000
Other relevant details are as follows :
(i)The Annual operating costs (excluding the depreciation/lease rent of the computer) are ₹ 10,00,000 as per estimates with an additional ₹ 2,00,000 being involved in start-up and training costs at the beginning of the first year.
(ii)The aforesaid costs are to be borne by the lessee ABC Ltd. Further, the lessee will borrow at an interest rate of 15% to finance the acquisition of the computer. Repayments for the same have to be done as per the schedule specified below :
Year-end
Principal ( ₹ )
Interest ( ₹ )
Total ( ₹ )
1
6,00,000
3,60,000
9,60,000
2
9,00,000
2,70,000
11,70,000
3
9,00,000
1,35,000
10,35,000
In order to depreciate its assets, ABC Ltd. employs the straight line method and makes a payment of 50% tax on its income. You, as a company secretary, are approached by ABC Ltd. to give advice regarding the choice of the more beneficial alternative, with proper and justified reasons. Consider Present Value Factor at 9%
Year
Present value factor at 9%
Present value factor at 15%
1
0.917
0.870
2
0.842
0.756
3
0.772
0.658
(Amount in ₹ )
Present Value of cash out flows under lease alternative
Year
Payment under lease contract
Total
Tax Shield
Net Cash PV factor
Total PV
Lease
15% gross Lump
Payment @ 50 % on
Outflows at 9 %
Rent
Revenue sum
lease
pay- ment
1
6,00,000
3,60,000 -
9,60,000 4,80,000 4,80,000
0.917
4,40,160
2
6,00,000
3,82,500 -
9,82,500 4,91,250 4,91,250
0.842 4,13,632.50
3
6,00,000
4,20,000 5,00,000
15,20,000 7,60,000 7,60,000
0.772
5,86,720
14,40,512.50
Present Value of cash out flows under Buying/Borrowing alternative
Year
Installment Payment
Tax advantage on
Net Cash
PV factor
Total
Principal
Interest Total
Interest
Depreciation
Outflows
at 9 %
PV
1
6,00,000 3,60,000 9,60,000 1,80,000
2,00,000
5,80,000
0.917
5,31,860
2
9,00,000 2,70,000 11,70,000 1,35,000
2,00,000
8,35,000
0.842
7,03,070
3
9,00,000 1,35,000 10,35,000
67,500
2,00,000
7,67,500
0.772
5,92,510
18,27,440
Salvage Value 12,00,000
0.772 (9,26,400)
9,01,040
Recommendation : PV of cash outflows under leasing is ₹ 14,40,512.50 which is more than the PV of cash outflows under buying/borrowing of ₹ 9,01,040. Therefore, the company is advised to opt buying/borrowing.
Depreciation for 3 years = ( ₹ 24,00,000 - ₹ 12,00,000) = ₹ 12,00,000; Depreciation per year = ₹ 4,00,000.
Tax savings on depreciation= 50% of ₹ 4,00,000 = ₹ 2,00,000
alternatives. Hence, this cost is irrelevant in the decision of purchase or lease. So it is not included in the calculation of cash outflows.
Source: ICSI Guideline Answers, June 2019, Q. 4(a) (Financial and Strategic Management paper, Syllabus 2017).
December 2021, Q. 11 (FSM) · Profitability Index method gives due consideration to the .................... (Ch. 13)
June 2021, Q. 94 (CMA) · In case of rising prices (Inflation), FIFO method will ......................... (Ch. 1)
December 2020, Q. 10 (FSM) · ABC project has the following cash inflows for 4 years as ₹ 34,444; ₹ 39,877; ₹ 25,000; and ₹ 52,800 respectively. (Ch. 13)
December 2018, Q. 6A(ii) (CMA) · Rank the following three proposals on the basis of net present value index method : (Ch. 13)