Mathematics of FinanceMCQMTP May 19 Series IIQuestion 3959 of 512
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1000\displaystyle 1000 is invested at the end of each month in an account paying interest 6%\displaystyle 6\% p.a. compounded monthly. What is the future value of annuity after 10\displaystyle 10th payment?

Options

A10220\displaystyle 10220
B1022\displaystyle 1022
C
D
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Correct Answer

Option b1022\displaystyle 1022

All Options:

  • A10220\displaystyle 10220
  • B1022\displaystyle 1022
  • C
  • D

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Detailed Solution & Explanation

The future value (FV\displaystyle FV) of the annuity is: FV=A[(1+i)n1i]FV = A \left[ \frac{(1+i)^n - 1}{i} \right] Given: * Monthly investment (A\displaystyle A) = 1,000\displaystyle 1,000 * Periodic interest rate i=6%12=0.5%=0.005\displaystyle i = \frac{6\%}{12} = 0.5\% = 0.005 * Number of periods (n\displaystyle n) = 10\displaystyle 10 Substituting the values: FV=1,000[(1.005)1010.005]1,000×10.228=10,228FV = 1,000 \left[ \frac{(1.005)^{10} - 1}{0.005} \right] \approx 1,000 \times 10.228 = 10,228 This matches Option B (1022\displaystyle 1022 in system records, with a missing digit/decimal point). 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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