CA Foundation · Quantitative Aptitude · Mathematics of Finance
Patel Engineering sets up a sinking fund to replace machinery costing ₹6,62,000 after 3 years. Equal amounts are deposited at the end of each year at 10% per annum compounded annually. The annual deposit is:
The annual deposit is ₹2,00,000. The sinking fund factor for 3 years at 10% is (1.1³ − 1)/0.10 = 3.31, so the deposit equals 6,62,000 divided by 3.31, which is exactly ₹2,00,000.
- A₹2,00,000Correct
- B₹2,20,667
- C₹1,80,000
- D₹2,18,000
Explanation
Future value factor for 3 years at 10% = (1.331 − 1)/0.10 = 3.31. Deposit = 6,62,000/3.31 = ₹2,00,000. Check: 2,00,000 × 3.31 = 6,62,000. ₹2,20,667 simply divides by 3 ignoring interest.
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