CA Foundation · Quantitative Aptitude · Mathematics of Finance
A sinking fund earns 10% per annum compounded annually, and equal deposits are made at the end of each year for 2 years. The fund balance after 2 years is ₹2,10,000. What is the annual deposit?
The annual deposit is ₹1,00,000. With two year-end deposits at 10%, the future value factor is 1.1 + 1 = 2.1, so the deposit equals ₹2,10,000 divided by 2.1, giving ₹1,00,000.
- A₹1,05,000
- B₹1,00,000Correct
- C₹95,000
- D₹1,10,000
Explanation
FV factor for 2 years at 10% = (1.21 − 1)/0.1 = 2.1. Deposit = 2,10,000/2.1 = ₹1,00,000. Check: 1,00,000×1.1 + 1,00,000 = 2,10,000. ₹1,05,000 just halves the target, ignoring interest.
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