Mathematics of FinanceMCQPYQ July 21Question 1450 of 512
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The future value of annuity of 2,000\displaystyle ₹ 2,000 for 5\displaystyle 5 years at 5%\displaystyle 5\% compounded annually is given as:

Options

A51,051\displaystyle 51,051
B21,021\displaystyle 21,021
C11,051\displaystyle 11,051
D61,054\displaystyle 61,054
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Correct Answer

Option c11,051\displaystyle 11,051

All Options:

  • A51,051\displaystyle 51,051
  • B21,021\displaystyle 21,021
  • C11,051\displaystyle 11,051
  • D61,054\displaystyle 61,054

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Detailed Solution & Explanation

Let the annual payment of the annuity be A=Rs. 2,000\displaystyle A = \text{Rs. }2,000. Given parameters: * Time (n\displaystyle n) = 5\displaystyle 5 years * Interest Rate (r\displaystyle r) = 5%\displaystyle 5\% p.a., so i=0.05\displaystyle i = 0.05 The formula for the Future Value of an ordinary annuity is: FV=A×(1+i)n1iFV = A \times \frac{(1+i)^n - 1}{i} Substituting the values: FV=2,000×(1.05)510.05FV = 2,000 \times \frac{(1.05)^5 - 1}{0.05} FV=2,000×1.2762810.05FV = 2,000 \times \frac{1.27628 - 1}{0.05} FV=2,000×0.276280.05FV = 2,000 \times \frac{0.27628}{0.05} FV=2,000×5.5256=11,051.2FV = 2,000 \times 5.5256 = 11,051.2 Thus, the future value is approximately Rs. 11,051\displaystyle \text{Rs. }11,051. Hence, **Option C** 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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