Mathematics of FinanceMCQPYQ Jan. 21Question 1444 of 512
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2,500\displaystyle ₹ 2,500 is paid every year for 10\displaystyle 10 years to pay off a loan. What is the loan amount if interest rate be 14%\displaystyle 14\% p.a. compounded annually?

Options

A15,847.90\displaystyle ₹ 15,847.90
B13,040.27\displaystyle ₹ 13,040.27
C14,674.21\displaystyle ₹ 14,674.21
D16,345.11\displaystyle ₹ 16,345.11
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Correct Answer

Option b13,040.27\displaystyle ₹ 13,040.27

All Options:

  • A15,847.90\displaystyle ₹ 15,847.90
  • B13,040.27\displaystyle ₹ 13,040.27
  • C14,674.21\displaystyle ₹ 14,674.21
  • D16,345.11\displaystyle ₹ 16,345.11

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Detailed Solution & Explanation

Let the annual payment be A=Rs. 2,500\displaystyle A = \text{Rs. }2,500. Given parameters: * Time (n\displaystyle n) = 10\displaystyle 10 years * Interest Rate (r\displaystyle r) = 14%\displaystyle 14\% p.a., so i=0.14\displaystyle i = 0.14 * Annuity Present Value Factor (P(10,0.14)\displaystyle P(10, 0.14)) 5.2161\displaystyle \approx 5.2161 The formula for the Present Value of an ordinary annuity is: PV=A×P(n,i)PV = A \times P(n, i) PV=2,500×5.2161=13,040.25PV = 2,500 \times 5.2161 = 13,040.25 Thus, the loan amount (present value) is approximately Rs. 13,040.27\displaystyle \text{Rs. }13,040.27. Hence, **Option B** 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

Exam Strategy Tip

Guaranteed 12-16 marks. Master your calculator! Learn the 'GT' and compound interest M+/M- tricks to solve annuity questions in 10 seconds without writing long formulas.

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