Mathematics of FinanceMCQPYQ June 24Question 1261 of 512
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Ram borrowed 5,000\displaystyle 5,000 at 12.5%\displaystyle 12.5\% per annum compound interest. The money was repaid after 3\displaystyle 3 years. The total interest paid by him approximately is (1+0.125)3=1.4238\displaystyle (1+0.125)^3 = 1.4238

Options

A2,119\displaystyle 2,119
B2,200\displaystyle 2,200
C2,000\displaystyle 2,000
D2,100\displaystyle 2,100
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Correct Answer

Option a2,119\displaystyle 2,119

All Options:

  • A2,119\displaystyle 2,119
  • B2,200\displaystyle 2,200
  • C2,000\displaystyle 2,000
  • D2,100\displaystyle 2,100

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Detailed Solution & Explanation

**Derivation of Compound Interest** Given: - Principal (P\displaystyle P) = Rs. 5,000\displaystyle \text{Rs. }5,000 - Rate (r\displaystyle r) = 12.5%=0.125\displaystyle 12.5\% = 0.125 per annum - Time (t\displaystyle t) = 3\displaystyle 3 years - Given: (1+0.125)3=1.4238\displaystyle (1 + 0.125)^3 = 1.4238 **Step 1: Calculate Future Value (A\displaystyle A)** A=P(1+r)tA = P(1 + r)^t A=5000(1+0.125)3A = 5000(1 + 0.125)^3 Using the given value (1.125)3=1.4238\displaystyle (1.125)^3 = 1.4238: A=5000×1.4238=Rs. 7,119A = 5000 \times 1.4238 = \text{Rs. }7,119 **Step 2: Calculate Compound Interest (CI\displaystyle CI)** CI=AP=71195000=Rs. 2,119CI = A - P = 7119 - 5000 = \text{Rs. }2,119 Hence, **Option A** is the correct answer.

About This Chapter: Mathematics of Finance

Paper

Paper 3: Quantitative Aptitude

Weightage

12-16 Marks

Key Topics

Simple & Compound Interest, Annuity, Perpetuity

The most important mathematical chapter in the entire syllabus. It covers Simple Interest (SI), Compound Interest (CI), Nominal vs Effective rates, Present and Future Value, Annuities (Ordinary and Due), Sinking Funds, and Perpetuities. The concepts learned here are applied heavily in CA Intermediate and Final.

View Official ICAI Syllabus

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