Mathematics of FinanceMCQMTP Jun 23 Series IIQuestion 1524 of 512
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The amount of an annuity due consisting of 15\displaystyle 15 annual payments invested at 8%\displaystyle 8\% effective is 10,000\displaystyle 10,000. Find the size of each payment:

Options

A373.86\displaystyle 373.86
B308.60\displaystyle 308.60
C341.01\displaystyle 341.01
DNone of these
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Correct Answer

Option c341.01\displaystyle 341.01

All Options:

  • A373.86\displaystyle 373.86
  • B308.60\displaystyle 308.60
  • C341.01\displaystyle 341.01
  • DNone of these

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Detailed Solution & Explanation

The future value of an annuity due is: FVdue=A[(1+i)n1i]×(1+i)FV_{\text{due}} = A \left[ \frac{(1+i)^n - 1}{i} \right] \times (1+i) Given: * Future Value (FVdue\displaystyle FV_{\text{due}}) = 10,000\displaystyle 10,000 * Time (n\displaystyle n) = 15\displaystyle 15 years * Interest rate (i\displaystyle i) = 8%\displaystyle 8\% p.a. = 0.08\displaystyle 0.08 Substituting the values: Annuity factor=(1.08)1510.08×1.083.17216910.08×1.08=27.1521×1.08=29.32427\text{Annuity factor} = \frac{(1.08)^{15} - 1}{0.08} \times 1.08 \approx \frac{3.172169 - 1}{0.08} \times 1.08 = 27.1521 \times 1.08 = 29.32427 A=10,00029.32427341.01A = \frac{10,000}{29.32427} \approx 341.01 This matches Option C (341.01\displaystyle 341.01). Hence, **Option C** 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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