Mathematics of FinanceMCQMTP June 24 Series IIQuestion 1532 of 512
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Mr. A borrows 5,00,000\displaystyle 5,00,000 to buy a house. If he pays equal instalments for 20\displaystyle 20 years and 10%\displaystyle 10\% interest on outstanding balance what will be the equal annual instalment?

Options

A5929.84\displaystyle 5929.84
B58729.84\displaystyle 58729.84
C68729.84\displaystyle 68729.84
DNone of these
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Correct Answer

Option a5929.84\displaystyle 5929.84

All Options:

  • A5929.84\displaystyle 5929.84
  • B58729.84\displaystyle 58729.84
  • C68729.84\displaystyle 68729.84
  • DNone of these

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Detailed Solution & Explanation

The annual instalment P\displaystyle P is: P=PVP(20,0.10)P = \frac{PV}{P(20, 0.10)} Given: * Loan amount (PV\displaystyle PV) = 5,00,000\displaystyle 5,00,000 * Annuity factor P(20,0.10)8.51356\displaystyle P(20, 0.10) \approx 8.51356 Substituting the values: P=5,00,0008.5135658,729.84P = \frac{5,00,000}{8.51356} \approx 58,729.84 Mathematically, the annual instalment is 58,729.84\displaystyle 58,729.84 (Option B). However, the official key marks Option A (5929.84\displaystyle 5929.84). 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

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