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Question
A company decides to set aside a certain sum at the end of each year to create a sinking fund, which should amount to ₹ 4 lakhs in 4 years at 10% p.a. Find the amount to be set aside each year?
[Given (1.1)4 = 1.4641]
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Solution
Given, A = ₹ 4,00,000, n = 4 years, r = 10% p.a, i = `"r"/100 = 10/100` = 0.1
Now, A = `"C"/"i"[(1 + "i")^"n" - 1]`
∴ 4,00,000 = `"C"/0.1[(1 + 0.1)^4 - 1]`
∴ 4,00,000 × 0.1 = C[(1.1)4 − 1]
∴ 40,000 = C[1.4641 − 1]
∴ 40,000 = C(0.4641)
∴ C = `(40,000)/0.4641`
∴ C = ₹ 86,188.32
∴ The amount to be set aside each year is ₹ 2,00,000.
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For annuity due,
C = ₹ 20,000, n = 3, I = 0.1, (1.1)–3 = 0.7513
Therefore, P = `square/0.1 xx [1 - (1 + 0.1)^square]`
= 2,00,000 [1 – 0.7513]
= ₹ `square`
The future amount, A = ₹ 10,00,000
Period, n = 20, r = 5%, (1.025)20 = 1.675
A = `"C"/"I" [(1 + "i")^"n" - 1]`
I = `5/200` = `square` as interest is calculated semi-annually
A = 10,00,000 = `"C"/"I" [(1 + "i")^"n" - 1]`
10,00,000 = `"C"/0.025 [(1 + 0.025)^square - 1]`
= `"C"/0.025 [1.675 - 1]`
10,00,000 = `("C" xx 0.675)/0.025`
C = ₹ `square`
