Mathematics of FinanceMCQMTP Nov 20Question 1511 of 512
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Find the present value of 10,000\displaystyle 10,000 to be required after 5\displaystyle 5 years, if the interest rate be 9\displaystyle 9 per cent compounded annually.

Options

A5500\displaystyle 5500
B6000\displaystyle 6000
C5600\displaystyle 5600
D6500\displaystyle 6500
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Correct Answer

Option d6500\displaystyle 6500

All Options:

  • A5500\displaystyle 5500
  • B6000\displaystyle 6000
  • C5600\displaystyle 5600
  • D6500\displaystyle 6500

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Detailed Solution & Explanation

The present value (PV\displaystyle PV) of a future sum compounded annually is: PV=FV(1+i)nPV = \frac{FV}{(1+i)^n} Given: * Future Value (FV\displaystyle FV) = 10,000\displaystyle 10,000 * Time (n\displaystyle n) = 5\displaystyle 5 years * Interest rate (i\displaystyle i) = 9%\displaystyle 9\% p.a. = 0.09\displaystyle 0.09 Substituting the values: PV=10,000(1.09)5=10,0001.5386246,499.316,500PV = \frac{10,000}{(1.09)^5} = \frac{10,000}{1.538624} \approx 6,499.31 \approx 6,500 This matches Option D (6500\displaystyle 6500). Hence, **Option D** 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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