CA Foundation · Quantitative Aptitude · Mathematics of Finance
Verma Ltd. sets up a sinking fund to repay a debenture of ₹3,31,000 after 3 years. It will deposit an equal amount at the end of each year, earning 10% per annum compounded annually. What is the annual deposit?
The annual deposit is ₹1,00,000. The future value of ₹1 deposited yearly for 3 years at 10% is 3.31, so the required deposit equals ₹3,31,000 divided by 3.31, which is ₹1,00,000.
- A₹1,10,333
- B₹1,00,000Correct
- C₹1,10,000
- D₹91,000
Explanation
Annuity FV factor for 3 years at 10% = (1.1^3 − 1)/0.1 = 0.331/0.1 = 3.31. Deposit = 3,31,000/3.31 = ₹1,00,000. Check: 1,00,000×(1.21+1.1+1)=3,31,000. ₹1,10,333 simply divides by 3 ignoring interest.
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