Mathematics of FinanceMCQPYQ Dec 21Question 1229 of 512
All Questions

A company needs money to $10,000$ in five years to replace as equipment. How much (in $) should be invested now at an interest rate of 8%\displaystyle 8\% p.a. is order to provide for this equipment?

Select Your Answer (Keyboard: A, B, C, D)
For any discrepancies in this question, email contact@cadada.in

Correct Answer

✅ Option b — $6,805$

All Options:

  • A$6,000$
  • B$6,805$
  • C$10,000$
  • D$11,000$

Detailed Solution & Explanation

**Derivation of Present Value of Equipment** Given: - Future Value (A\displaystyle A) = Rs. 10,000\displaystyle Rs. \displaystyle \text{Rs. }10,000 - Time (t\displaystyle t) = 5\displaystyle 5 years - Rate of Interest (r\displaystyle r) = 8%\displaystyle 8\% per annum compounded annually **Step 1: Calculate the Present Value (P\displaystyle P)** A=P(1+r)tA = P(1 + r)^t 10000=P(1+0.08)510000 = P(1 + 0.08)^5 10000=P(1.08)510000 = P(1.08)^5 10000=P(1.469328)10000 = P(1.469328) P=100001.469328≈Rs. 6,805.83≈Rs. 6,805P = 100001.469328\displaystyle \frac{10000}{1.469328} ≈\displaystyle \approx Rs. \displaystyle \text{Rs. }6,805.83 ≈\displaystyle \approx Rs. \displaystyle \text{Rs. }6,805 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

Exam Strategy Tip

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.

Related Comparison Tables

More Questions from Mathematics of Finance

Ready to Master Mathematics of Finance?

Practice all 512 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free