Question 1:
If the basic salary of an employee is Rs. 37000 and allowances are Rs. 22,000.
What is the taxable income of employee?
Solution
Basic Salary Rs.37000
Allowances Rs. 22000
% of Allowances (22,000 / 37000) x100 = 59.50%
Allowed non-taxable Allowance (50% = 0.5 x 37000 = 18500)
Taxable Allowances (59.50% - 50%)
(22000 - 18500) Rs. 3500
Hence 3,500 Rs. of allowances are taxable.
Total Taxable Income (37000 + 3500) Rs.40500
Question 2:
If the salary and allowances of an employee is as follows:
Basic salary = Rs. 12,000
House Rent Allowance = 45%
Conveyance Allowance = 5%
Utilities Allowance = 7%
Group Insurance/Medical = 0%
Misc. Social Charges = 5.8%
There are 12 casual, 24 earned and no sick leaves per year where as normal working days per month are 26. Find the Gross remuneration of the employee.
Solution
Rs. Rs.
Basic Salary 12,000
Allowances:
House Rent 45% (Calculation # 1) Rs. 5,400
Conveyance 5% (Calculation 2) Rs. 600
Utilities 7% (Calculation # 3) Rs. 840
Total Allowances 6,840
Gross Salary 18,840
Misc. Social Charges 5.8% (Calculation # 4) 1,093
Leaves Cost (Calculation # 5) 26,086
Gross Remuneration 46,019
Additional Working
Calculation # 1
H. R. Allowance 45% of Basic Salary
= (45 / 100) x 12,000 = Rs. 5,400
Calculation # 2
Conveyance Allowance 5% of Basic Salary
= (5 / 100) x 12,000 = Rs. 600
Calculation # 3
Utilities Allowances 7% of Basic Salary
= (7 / 100) x 12,000 = Rs. 840
Calculation # 4
Misc. Social Charges 5.8% of Gross Salary
= (58 / 1000) x 18,840 = 1,092.72 or Rs. 1,093
Calculation # 5
Cost of Leaves
Causal = (12 / 26) x 18,840 = 8,695.38 or 8,695 Rs.
Earned = (24 / 26) x 18,840 = 17,390.77 or 17,391 Rs.
Total cost of leaves = 26,086 Rs.
Question 3:
A trade discount series of 20, 10, and 5 is offered on an item which has a list price of Rs. 9100. Find the amount of discount and the net price.
Solution
Rs.
List Price = 9,100
Here Discount1 = 20%
Discount 2 = 10%
Discount 3 = 5%
Net Price = L (1 – d1) (1 – d2) (1 – d3)
= 9,100 (1 – 0.2) (1 – 0.1) (1 – 0.05)
= 9,100 (0.8) (0.9) (0.95)
= 9,100 (0.984)
Net Price = Rs.6, 224.4
Discount = List Price - Net Price
= 9,100 - 6,224.4
Discount = 2,875.6
Question 4:
If your goal is to have an amount of 325000 in seven years and you can get interest rate of 9% per annum compounded annually. How much would you need to invest now?
Solution
Compound Amount S = Rs. 325,000
Rate of Interest r = 9 % = 0.09
Number of Periods n = 7 years
Principal Amount P = ?
S = P (1+r) ^n
325,000 = P (1 + 0.09) ^7
325,000 = P (1.09) ^7
325,000 = P (1.82804)
Dividing both side by 1.82804
325,000 / 1.82804 = P
177,786.04 = P
So the Principal amount need to invest now = Rs. 177,786.04
Question 5:
If you start saving Rs. 28,000 at the end of each six month, and you get interest rate 11% (per annum) compounded semi-annually, how much will you have accumulated at the end of 20 years?
Solution
Amount of Annuity per period C = Rs. 28,000
Rate of Interest i = 11 % p.a
= 5.5 % = 0.055 semi-annually
Number of Payment n = 20 yearly = 40 semi-annually
Accumulated Value of Annuity S = ?
S = C * ((1 + i) ^n – 1) / i
S = 28,000 * ((1 + .055) ^40 – 1) / 0.055
S = 28,000 * ((1.055) ^40 – 1) / 0.055
S = 28,000 * (8.51331 – 1) / 0.055
S = 28,000 (136.60564)
So the Future Value or Accumulated Value of an ordinary annuity is
S = Rs.3824957.92
Question 6:
The price of an item decreased from Rs. 856 to Rs.752. What is the percentage change in price of item?
Solution
Initial Price = Rs. 856
Revised Price = Rs.752
Change = Revised Price - Initial Price
= 752 - 856 = Rs. - 104
Percentage of Change = (Change / Initial Price) x 100
= (- 104 / 856) x 100
= - 12.1495 %
So the price decreased by 12.1495 %
Question # 7
Suppose you can afford to pay 9,000 per month on a loan. How much can you borrow if the loan is for a period of 15 years and the interest rate is 5% per annum compounded monthly?
Solution
Cash flow per period C = 9,000 Rs.
Rate of Interest i = 5 % p.a = 0.004166667 p.m
Number of Payment n = 15 year = 180 month
Discounted Value of Annuity S = ?
S = C * (1 - (1 + i)^-n) / i
S = 9,000 * (1 - (1 .004166667)^-180) / 0.004166667
S = 9,000 * (1 - (.473103127) / 0.004166667
S = 9,000 * (.526896872) / 0.004166667
S = 9,000 * (126.45523937)
S = Rs. 1,138,097.15
So the Present Value or discounted Value of a loan is
S = Rs. 1,138,097.15
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