Question

A fund has 10,000 at the start of the year. During the year $5,000 is added to the fund and $2,000 is removed. The interest earned during the year is $1,000. Which of the following are true?
(I) The amount in the fund at the end of the year is $14,000. (II) If we assume that any deposits and withdrawals occur uniformly throughout the year, i is approximately 8.33%.
(III) If the deposit was made on April 1 and the withdrawal was made on August 1, then i is approximately 7.74%

Answer 1

If we assume that Deposits & withdrawals accrue simultaneously then, Interest earned return

i = (1000/13000)*100

i =7.69%

So the amount remained, If deposits & Withdrawals accrue simultaneously then,

=( 10000+5000-2000)

So return will be calculated on 13000.

So statement (B) and (C) are false as Return is 7.692%

The amount of funds remaining at the end of the period will be after considering all the deposits and withdrawals and interest earned so

={ 10000+5000-2000+1000}

= 14000

So statement (A) will be true as Amount of fund at end of year is 14000.