Question

What would be the monthly rate at which INR 4,00,000 needs to be invested, to receive INR 4,78,565, 2 years from now?

Select one:
a. 9%
b. 0.75%
c. 0.82%
d. 9.8%

Answer 1

The correct answer is B

Explanation:

Computing the rate by using the excel formula of rate as:

=Rate(nper,pmt,pv,fv,type)

where

nper is number of years is 2 years

Pmt is monthly payment which is Rs 0

pv is present value which is -Rs 400,000

fv is future value which is Rs 478,565

Type is 0

So, putting the values above:

=Rate(2,0,-400000,478565,0)

= 9%

This 9% is the annual rate, therefore, computing the monthly rate as:

Monthly rate = Annual rate / Number of months

where

Annual rate is 9%

Number of months in a year is 12 months

So,

Monthly rate = 9% / 12

Monthly rate = 0.75%