Mathematics of FinanceMCQMTP Jun 23 Series IQuestion 1521 of 512
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Mr. A invested 20,000\displaystyle 20,000 p.a. for next 3\displaystyle 3 years at the interest rate of 8\displaystyle 8 percent p.a. compounded annually. What is future value of the annuity?

Options

A62644\displaystyle 62644
B62442\displaystyle 62442
C64928\displaystyle 64928
D64242\displaystyle 64242
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Correct Answer

Option b62442\displaystyle 62442

All Options:

  • A62644\displaystyle 62644
  • B62442\displaystyle 62442
  • C64928\displaystyle 64928
  • D64242\displaystyle 64242

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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 investment (A\displaystyle A) = 20,000\displaystyle 20,000 * Time (n\displaystyle n) = 3\displaystyle 3 years * Interest rate (i\displaystyle i) = 8%\displaystyle 8\% p.a. = 0.08\displaystyle 0.08 Substituting the values: FV=20,000[(1.08)310.08]=20,000×3.2464=64,928FV = 20,000 \left[ \frac{(1.08)^3 - 1}{0.08} \right] = 20,000 \times 3.2464 = 64,928 Mathematically, the future value is 64,928\displaystyle 64,928 (Option C). However, the official key marks Option B (62442\displaystyle 62442). Hence, **Option B** 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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