Mathematics for FinancePYQ May 18Question 1433 of 512
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Mr. X invest 10,000\displaystyle 10,000 every year starting from today for next 10\displaystyle 10 years suppose interest rate is 8%\displaystyle 8\% per annual compounded annually. Calculate future value of the annuity.

Options

A1,56,454.88\displaystyle 1,56,454.88
B1,56,554.88\displaystyle 1,56,554.88
C1,44,865.625\displaystyle 1,44,865.625
DNone of these
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Correct Answer

✅ Option a — 1,56,454.88\displaystyle 1,56,454.88

All Options:

  • A1,56,454.88\displaystyle 1,56,454.88
  • B1,56,554.88\displaystyle 1,56,554.88
  • C1,44,865.625\displaystyle 1,44,865.625
  • DNone of these

Detailed Solution & Explanation

Given parameters: * Annual Payment (A\displaystyle A) = Rs. 10,000\displaystyle \text{Rs. }10,000 * Time (n\displaystyle n) = 10\displaystyle 10 years * Interest Rate (r\displaystyle r) = 8%\displaystyle 8\% p.a. compounded annually, so i=0.08\displaystyle i = 0.08 Since the payments start today (at the beginning of each year), this is an annuity due. The formula for the Future Value of an annuity due (FVdue\displaystyle FV_{\text{due}}) is: FVdue=A×(1+i)n−1i×(1+i)FV_{\text{due}} = A \times \frac{(1+i)^n - 1}{i} \times (1+i) Substituting the values: FVdue=10,000×(1.08)10−10.08×1.08FV_{\text{due}} = 10,000 \times \frac{(1.08)^{10} - 1}{0.08} \times 1.08 First, let's calculate (1.08)10\displaystyle (1.08)^{10}: (1.08)10≈2.158925(1.08)^{10} \approx 2.158925 Substituting this back: FVdue=10,000×2.158925−10.08×1.08FV_{\text{due}} = 10,000 \times \frac{2.158925 - 1}{0.08} \times 1.08 FVdue=10,000×1.1589250.08×1.08FV_{\text{due}} = 10,000 \times \frac{1.158925}{0.08} \times 1.08 FVdue=10,000×14.48656×1.08=1,56,454.88FV_{\text{due}} = 10,000 \times 14.48656 \times 1.08 = 1,56,454.88 Thus, the future value of the annuity is Rs. 1,56,454.88\displaystyle \text{Rs. }1,56,454.88. Hence, **Option A** is the correct answer.

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