Orientation Note

Which Part of the Syllabus is Covered in this Chapter?

In this chapter, we will be covering the following part of the syllabus (highlighted in green):

RBI Grade B exam syllabus –

SEBI Grade A syllabus –

Although, there is no direct mention of time value of money in the official syllabus, but this chapter
is really very crucial for understanding of some other chapter, like bonds, valuations of equity and
capital budgeting. Therefore, this chapter forms the base for some other chapters, which are directly
mentioned in the syllabus of RBI Grade B and SEBI Grade A.

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What will you study in this chapter?
To cover the syllabus topic as given above, you will be studying the following things in this chapter -
• Concept – Time Value of money
• Concept – Discounting and Compounding
• Rule of 72, 144 and 144
• Concept – Annuities
• Different types of annuities
• Numerical

➢ Difficulty Level – This chapter contains basic concepts of Time Value of Money (TVM) that are easy to
understand, however multiple revisions are required to understand the core concept of Time Value of
Money (TVM).

How to approach this chapter for the objective component?

• Importance – The significance of this chapter is important from the examination point of view. Many
questions have been asked from this chapter. For reference, you can check the document containing
the Previous Year Question (PYQs) of this chapter.
• Number of objective questions asked from this chapter are depicted in the following table

Examination Year RBI Grade B (Phase 2) SEBI Grade A (Phase 1) SEBI Grade A (Phase 2)

2016 0 Exam not held Exam not held

2017 4 Exam not held Exam not held

2018 0 0 0

2019 0 Exam not held Exam not held

2020-2021 0 0 0

2022 0 0 0

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 • Note – All the concepts taught in this chapter are very easy to comprehend and concepts of Present
Value and Future value are important to understand, however if you are short on time, you can
leave the numerical of the Time Value of Money and please don’t be scared of the lengthy and
complex numerical. Seeing the trend of the past exam, RBI is not asking in-depth questions from the
numerical of this chapter.
• Calculators are not allowed in the exam, so you may leave the lengthy numerical but understand the
logic and concept behind them.
• Moreover, if you are practicing different numerical of time value of money, then you can take the
help of the calculators to arrive at the correct answer.
• Let us take an example, P = (1+r/m)^3, this equation is solvable with hands, and here you can arrive
at the correct answer without any need of calculator, but if there is any equation wherein, there is a
higher power than 3, then in those cases use calculators. For example, you can use normal calculator,
when you are solving P = (1+r/m)^4
• Nature of Questions (Conceptual/Factual) – The chapter is very conceptual in nature and very high
chances are there that a conceptual question will be asked in exam. However, factual questions can
also be asked.
For example:
Type of Question Question

Conceptual Which of the following is the correct definition of annuity ? RBI Grade B
– Phase 2 - 2017
A. NPVs of all the equal cash inflows for a finite period minus the
NPVs of all the equal cash outflows during that period
B. NPVs of all the equal cash flows which are equal for a finite period
C. NPVs of all the equal cash inflows for a finite period minus the
NPVs of all the equal cash outflows during that period
D. NPVS of all the equal cash flows which are equal for a invite
period.
E. None of the above

Answer – Option B
Factual An amount of 1000 at 8% becomes 2000, find the number of years
required using the rule of 72. RBI Grade B – Phase 2 – 2017.
A. 7 Years
B. 8 Years
C. 9 Years
D. 8.5 Years
E. None of the above

Answer – Option C

How to approach this chapter for the descriptive component?

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 • Note – The RBI Grade B examination had a descriptive pattern of examination from 2007-14. Later
on, the same was discontinued in 2015 and reintroduced in the year 2021. However, In the SEBI Grade
A examination, there is no descriptive pattern and entire paper is objective in nature.
• Importance – The significance of this chapter for descriptive component is comparatively low from
the examination point of view.
• Number of Descriptive questions asked from this chapter are depicted in the following table

RBI Grade B Phase 2

2007-2014 0
2021 0
2022 0

• Nature of Questions -

Type of Question Question

Static The value of Rupee is more valuable today than tomorrow - Discuss

Current Not Applicable

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