Banking — Multiple Choice Questions

A recurring deposit is also known as:

1. maturity deposit

2. cumulative time deposit

3. regular saving deposit

4. investment fund deposit

Answer

In recurring deposit, the deposits and interest accumulate over a fixed time period

Hence, Option 2 is the correct option.

In a recurring deposit (R.D.):

1. a person gets the same interest every month

2. a person gets the same maturity amount every year

3. a person deposits the same amount every month

4. the government deposits an amount equal to the interest every year.

Answer

Recurring deposit (RD) is a type of savings account where you deposit a fixed amount of money regularly.

Hence, Option 3 is the correct option.

In a recurring deposit, the maturity value is given by:

1. $(P \times n) + I$

2. $P \times n \times I$

3. $\dfrac{P \times n \times I}{100}$

4. $\dfrac{(P \times n) + I}{100}$

Answer

Maturity value = Sum deposited + Interest

Sum deposited = P × n

Maturity value = P × n + Interest

Hence, Option 1 is the correct option.

₹ P is deposited for n number of months in a recurring deposit account which pays interest at the rate of r% per annum. The nature and time of interest calculated is :

1. compound interest for n number of months

2. simple interest for n number of months

3. compound interest for one month

4. simple interest for one month

Answer

In a Recurring Deposit (RD), the interest is calculated using the concept of Equivalent Monthly Principal.

The first installment stays in the bank for $n$ months, the second for n - 1 months, and the last for 1 month. To simplify this, we use the sum of natural numbers formula to find the total "month-units" of interest:

Total monthly principal = P × $\dfrac{n(n + 1)}{2}$

Because we have converted the entire duration into an equivalent principal for just one month, the time (T) used in the standard S.I. formula is :

T = $\dfrac{1}{12}$ years

Final formula,

I = $P \times \dfrac{n(n + 1)}{2} \times \dfrac{r}{100} \times \dfrac{1}{12}$

The interest is simple in nature, and it is calculated on the equivalent principal for one month.

Hence, Option 4 is the correct option.

If Ramesh Kumar has an R.D. in a post office, he has to deposit:

1. an amount only once

2. the same amount every month

3. a decreasing amount every month

4. an increasing amount every month

Answer

In a recurring deposit a person deposits the same amount every month.

Hence, Option 2 is the correct option.

In an R.D., the maturity value is the sum of the total amount deposited and the interest. If P is the amount deposited every month for n months and R is the rate of interest, then interest I is equal to:

1. $P \times \dfrac{n}{12} \times \dfrac{R}{100}$

2. $P \times \dfrac{n(n - 1)}{12} \times \dfrac{R}{100}$

3. $P \times \dfrac{n(n + 1)}{2 \times 12} \times \dfrac{R}{100}$

4. $P \times \dfrac{n}{2 \times 12} \times \dfrac{R}{100}$

Answer

Given:

Monthly deposit = P

Rate = R

Time = n

$\therefore I = P \times \dfrac{n(n + 1)}{2 \times 12} \times \dfrac{R}{100}$

Hence, Option 3 is the correct option.

Mohit opened a Recurring deposit account in a bank for 2 years. He deposits ₹1,000 every month and receives ₹25,500 on maturity. The interest he earned in 2 years is:

1. ₹13,500

2. ₹3,000

3. ₹24,000

4. ₹1500

Answer

Given:

P = ₹1000

n = 24 months

Maturity value = ₹25,500

Sum deposited = P × n =1000 × 24 = ₹24,000

Maturity Value = Sum deposited + Interest

Interest = Maturity Value - Sum deposited

∴ I = 25,500 - 24,000 = ₹1,500

Hence, Option 4 is the correct option.

Naveen deposits ₹800 every month in a recurring deposit account for 6 months. If he receives ₹4,884 at the time of maturity, then the interest he earns is:

1. ₹84

2. ₹42

3. ₹24

4. ₹284

Answer

Given:

P = ₹800

n = 6 months

Maturity Amount= ₹4,884

Sum deposited = P × n = 800 × 6 = ₹4,800

Maturity Value = Sum deposited + Interest

Interest = Maturity Value - Sum deposited

∴ I = ₹(4,884 - 4,800) = ₹84

Hence, Option 1 is the correct option.

Mr. Anuj deposits ₹ 500 per month for 18 months in a recurring deposit account at a certain rate. If he earns ₹570 as interest at the time of maturity, then his matured amount is:

1. ₹(500 x 18 + 570)

2. ₹(500 x 19 + 570)

3. ₹(500 x 18 x 19 + 570)

4. ₹(500 x 9 x 19 + 570)

Answer

Given,

Monthly deposit = ₹500

Number of months = 18

Interest earned = ₹570

By formula,

Matured amount = Total deposit + Interest

= Monthly deposit x number of months + Interest

= ₹(500 x 18 + 570)

Hence, option 1 is the correct option.

Anwesha intended to open a Recurring Deposit account of ₹ 1000 per month for 1 year in a Bank, paying a 5% per annum rate of simple interest. The bank reduced the rate to 4% per annum. How much must Anwesha deposit monthly for 1 year so that her interest remains the same?

1. ₹ 12325

2. ₹ 1250

3. ₹ 1200

4. ₹ 1000

Answer

In first case :

P = ₹ 1000

r = 5%

n = 12 months

Interest = $P \times \dfrac{n(n + 1)}{2 \times 12} \times \dfrac{r}{100}$

$= 1000 \times \dfrac{12 \times (12 + 1)}{2 \times 12} \times \dfrac{5}{100} \\[1em] = 1000 \times \dfrac{12 \times 13}{2 \times 12} \times \dfrac{1}{20} \\[1em] = 25 \times 13 \\[1em] = ₹ 325.$

In second case :

P = ₹ x (Let)

r = 4%

n = 12 months

Interest = ₹ 325

$\therefore 325 = x \times \dfrac{12 \times 13}{2 \times 12} \times \dfrac{4}{100} \\[1em] \Rightarrow 325 = x \times \dfrac{13}{2} \times \dfrac{1}{25}\\[1em] \Rightarrow x = \dfrac{325 \times 25 \times 2}{13} \\[1em] \Rightarrow x = \dfrac{16250}{13} = \text{₹ 1250.}$

Hence, Option 2 is the correct option.

Rahul deposited ₹ 11,700 in a recurring deposit account for $1\dfrac{1}{2}$ years. The amount deposited by him per month is :

1. ₹ 650

2. ₹ 780

3. ₹ 6,500

4. ₹ 7,800

Answer

Given,

Time = $1\dfrac{1}{2}$ years = 18 months

Amount deposited = ₹ 11,700

Amount deposited per month

= $\dfrac{\text{Total amount deposited}}{\text{Total number of months}}$

$\dfrac{11700}{18}$

= ₹ 650.

Hence, Option 1 is the correct option.

Radha deposited ₹ 400 per month in a recurring deposit account for 18 months. The qualifying sum of money for the calculation of interest is :

1. ₹ 3600

2. ₹ 7200

3. ₹ 68,400

4. ₹ 1,36,800

Answer

Since, Radha deposits ₹ 400 per month in a recurring deposit account for 18 months, thus the amount deposited in first month will earn interest for 18 months, the amount deposited in second month will earn interest for 17 months and so on.

Qualifying sum = ₹ 400 × (18 + 17 + 16 + ……..+ 1)

= ₹400 × $\dfrac{18(18 + 1)}{2}$

= ₹ 400 × 9 × 19

= ₹ 68,400.

Hence, Option 3 is the correct option.