CMA Intermediate · Financial Management and Business Data Analytics · Time Value of Money
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. After paying the first instalment, what is the outstanding loan balance?
The outstanding balance is about ₹1,73,554, equal to the present value of the two remaining ₹1,00,000 instalments at 10% (factor 1.7355). Subtracting just one instalment from the loan ignores interest and is wrong.
- A₹1,73,554Correct
- B₹1,48,690
- C₹1,98,690
- D₹2,00,000
Explanation
Instalment = 2,48,690/2.4869 = 1,00,000. Interest year 1 = 24,869; principal repaid = 75,131; balance = 1,73,559. Alternatively, PV of two remaining instalments = 1,00,000 x 1.7355 = 1,73,550. The balance is about ₹1,73,554, not the simple deduction of one instalment.
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