CMA Intermediate · Financial Management and Business Data Analytics · Time Value of Money
Anil wants ₹6,10,510 at the end of 5 years by making equal year-end deposits into a fund earning 10% p.a. (FV annuity factor for 5 years at 10% = 6.1051). What is the required annual deposit?
The required annual deposit is ₹1,00,000. Dividing the target sum of ₹6,10,510 by the future value annuity factor of 6.1051 gives this amount. Simply dividing by 5 years ignores interest and overstates the deposit.
- A₹1,00,000Correct
- B₹1,22,102
- C₹90,000
- D₹1,10,000
Explanation
Deposit = 6,10,510 / 6.1051 = ₹1,00,000. Check: 1,00,000 × 6.1051 = 6,10,510. Dividing the target by 5 gives ₹1,22,102, which ignores interest earned.
Did you get it right without looking?
One question tells you little. A timed set on Time Value of Money shows your real accuracy, how long you take and where you lose marks.
More Time Value of Money questions
- A sum doubles in 9 years under annual compounding at an unknown rate. Using the Rule of 72 as a quick approximation, which rate is closest, …
- Ramesh will receive ₹1,33,100 exactly 3 years from today. If his opportunity cost of funds is 10% p.a. compounded annually, what is the pres…
- Gopal Industries borrows ₹2,48,690 repayable in 3 equal year-end instalments at 10% p.a. The PV annuity factor for 3 years at 10% is 2.4869.…
- Which statement best explains why a rupee received today is preferred to a rupee received a year later, in the concept of time value of mone…
- An analyst in a Mumbai brokerage builds a spreadsheet to find the present value of a stream of equal year-end payments. Which spreadsheet fu…
- Using the Rule of 72, approximately how many years will it take for a sum invested at 9% p.a. compound interest to double?