NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Time Value of Money
Mr. Reddy deposits Rs 10,000 at the end of each year for 3 years in an account earning 10% per annum. What is the accumulated value at the end of year 3?
The accumulated value is Rs 33,100. Deposits are at year-end, so they form an ordinary annuity: 12,100 + 11,000 + 10,000. The annuity-due figure of Rs 36,410 would apply only if deposits were made at the start of each year.
- ARs 33,100Correct
- BRs 36,410
- CRs 30,000
- DRs 34,210
Explanation
Ordinary annuity FV = 10,000 x [(1.1)^3 - 1]/0.1 = 10,000 x 3.31 = Rs 33,100. Check: 10,000x1.21 + 10,000x1.1 + 10,000 = 33,100. Rs 36,410 is the annuity-due value (one more period of growth). Rs 30,000 ignores interest.
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