Question

Mrs. Menon plans to save for her daughter's marriage. She wants to accumulate a sum of ₹ 4,00,000 at the end of 4 years. How much should she invest at the end of each year from now, if she can get interest compounded at 10% p.a. ?

 [Given (1.1)⁴ = 1.4641]

Answer 1

Given A = ₹ 4,00,000 

Period (n) = 4 years 

Rate of interest (r) = 10% 

Annuity immediate (C) = ? 

i = `"r"/100 = 0/100 = 0.1`

A = `"C"/"i" [(1 + "i")^"n" - 1]`

`400000 xx 0.1 = "C" [(1.1)^4 - 1]`

40000 = C  [1.4641 - 1]

40000 = C [0.4641]

C = `40000/0.4641`

C = 86188.32

C = 86188

∴ Mrs. Menon should invest ₹ 86188 at the end of each year.