CA Foundation · Quantitative Aptitude · Mathematics of Finance
Verma takes a loan of ₹1,00,000 at 10% per annum compounded annually, repayable in two equal annual instalments at the end of each year. Given that the annuity factor for 2 years at 10% is 1.7355, the instalment is approximately:
The instalment is about ₹57,619. For an amortised loan, the equal payment is the loan amount divided by the present value annuity factor. Dividing 1,00,000 by 1.7355 for two years at 10 percent gives roughly 57,619 per year.
- A₹57,619Correct
- B₹55,000
- C₹52,381
- D₹60,000
Explanation
Instalment = Loan / annuity factor = 1,00,000 / 1.7355 ≈ ₹57,619. Check: 57,619 × 1.7355 ≈ 1,00,000. The ₹55,000 option is wrong because it takes the loan plus simple interest for 2 years (1,20,000) divided by 2 with an error, ignoring the declining balance; ₹60,000 uses full simple interest.
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