CA Foundation · Quantitative Aptitude · Mathematics of Finance
Sunita deposits ₹4,000 at the end of each year for 2 years in an account paying 5% per annum compounded annually. What will be the accumulated amount at the end of 2 years?
The accumulated amount is ₹8,200. With deposits at year-end, the first ₹4,000 grows for one year to ₹4,200 and the second earns no interest, giving ₹4,200 plus ₹4,000. Treating deposits as made at the start would wrongly give ₹8,610.
- A₹8,000
- B₹8,200Correct
- C₹8,610
- D₹8,820
Explanation
For an ordinary annuity, the first deposit earns interest for 1 year and the second earns none. FV = 4,000 × 1.05 + 4,000 = 4,200 + 4,000 = ₹8,200. ₹8,610 is wrong because it treats the deposits as made at the start of each year (annuity due).
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