Mathematics of FinanceMCQPYQ Sep 24Question 1480 of 512
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What is the present value of 1000\displaystyle 1000 to be received after two years compounded annually at 10%\displaystyle 10\% interest rate?

Options

A826\displaystyle 826
B800\displaystyle 800
C836\displaystyle 836
D835\displaystyle 835
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Correct Answer

Option a826\displaystyle 826

All Options:

  • A826\displaystyle 826
  • B800\displaystyle 800
  • C836\displaystyle 836
  • D835\displaystyle 835

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Detailed Solution & Explanation

The present value (PV\displaystyle PV) of a future sum FV\displaystyle FV compounded annually is: PV=FV(1+i)nPV = \frac{FV}{(1+i)^n} Given: * Future Value (FV\displaystyle FV) = 1,00,000\displaystyle 1,00,000 * Time (n\displaystyle n) = 2\displaystyle 2 years * Interest rate (i\displaystyle i) = 10%\displaystyle 10\% p.a. = 0.10\displaystyle 0.10 Substituting the values: PV=1,000(1.10)2=1,0001.21826.45PV = \frac{1,000}{(1.10)^2} = \frac{1,000}{1.21} \approx 826.45 Thus, the present value is approximately 826\displaystyle 826. 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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