CA Foundation · Quantitative Aptitude · Mathematics of Finance
Vikram deposits ₹20,000 at the end of every year for 3 years in an account paying 10% per annum compounded annually. He makes no withdrawals. What is the balance in the account immediately after the third deposit?
The balance is ₹66,200. Using the ordinary annuity formula, 20,000 × (1.1³ − 1)/0.1 = 20,000 × 3.31. Equivalently, the deposits grow to 24,200, 22,000 and 20,000, which add up to ₹66,200 at the time of the last deposit.
- A₹66,200Correct
- B₹60,000
- C₹72,820
- D₹60,780
Explanation
FV = 20,000 × [(1.1)^3 − 1]/0.1 = 20,000 × 3.31 = ₹66,200. Check: 20,000×1.21 + 20,000×1.1 + 20,000 = 24,200 + 22,000 + 20,000 = 66,200. ₹72,820 is the annuity-due value (66,200×1.1), a wrong timing assumption.
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