Mathematics of FinanceMCQMTP Nov 18Question 1486 of 512
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Find the future value of annuity 1000\displaystyle 1000 made annually for 7\displaystyle 7 years at interest rate of 14%\displaystyle 14\% compounded annually is

Options

A10730.71\displaystyle 10730.71
B10735\displaystyle 10735
C10734\displaystyle 10734
D10937\displaystyle 10937
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Correct Answer

Option a10730.71\displaystyle 10730.71

All Options:

  • A10730.71\displaystyle 10730.71
  • B10735\displaystyle 10735
  • C10734\displaystyle 10734
  • D10937\displaystyle 10937

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Detailed Solution & Explanation

The future value (FV\displaystyle FV) of an ordinary annuity is: FV=A[(1+i)n1i]FV = A \left[ \frac{(1+i)^n - 1}{i} \right] Given: * Annual payment (A\displaystyle A) = 1,000\displaystyle 1,000 * Time (n\displaystyle n) = 7\displaystyle 7 years * Interest rate (i\displaystyle i) = 14%\displaystyle 14\% p.a. = 0.14\displaystyle 0.14 Substituting the values: FV=1,000[(1.14)710.14]FV = 1,000 \left[ \frac{(1.14)^7 - 1}{0.14} \right] Using (1.14)72.502298\displaystyle (1.14)^7 \approx 2.502298: FV=1,000[2.50229810.14]=1,000×10.7307=10,730.70FV = 1,000 \left[ \frac{2.502298 - 1}{0.14} \right] = 1,000 \times 10.7307 = 10,730.70 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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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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