Mathematics of FinanceMCQMTP Nov 18Question 1489 of 512
All Questions

Suppose your father decides to gift you 5,000\displaystyle 5,000 every year starts from today for the next four years. You deposit the amount is a bank and as and when you receive and get 10%\displaystyle 10\% per annum interest rate compound annually. The present value of this annuity is [P(3,0.10)=2.48685]\displaystyle [P(3,0.10) = 2.48685]

Options

A17,434.25\displaystyle 17,434.25
B17,344.25\displaystyle 17,344.25
C17,434.52\displaystyle 17,434.52
D17,344.52\displaystyle 17,344.52
For any discrepancies in this question, email contact@cadada.in

Correct Answer

Option a17,434.25\displaystyle 17,434.25

All Options:

  • A17,434.25\displaystyle 17,434.25
  • B17,344.25\displaystyle 17,344.25
  • C17,434.52\displaystyle 17,434.52
  • D17,344.52\displaystyle 17,344.52

Ad

Detailed Solution & Explanation

Since payments start today, this is an annuity due. The present value (PVdue\displaystyle PV_{\text{due}}) is: PVdue=A+A×P(3,0.10)PV_{\text{due}} = A + A \times P(3, 0.10) Given: * Annual payment (A\displaystyle A) = 5,000\displaystyle 5,000 * Factor P(3,0.10)=2.48685\displaystyle P(3, 0.10) = 2.48685 Substituting the values: PVdue=5,000+5,000×2.48685=5,000+12,434.25=17,434.25PV_{\text{due}} = 5,000 + 5,000 \times 2.48685 = 5,000 + 12,434.25 = 17,434.25 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

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.

Key Concepts to Understand

Related Comparison Tables

More Questions from Mathematics of Finance

Ready to Master Mathematics of Finance?

Practice all 512 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free