Question

A person wants to create a fund of ₹6,96,150 after 4 years at the time of his retirement. He decides to invest a fixed amount at the end of every year in a bank that offers him interest of 10% p.a. compounded annually. What amount should he invest every year? [Given (1.1)⁴ = 1.4641]

Answer 1

Given, A = ₹6,96,150, n = 4 years, r = 10% p.a. 

i = `"r"/(100) = (10)/(100)` = 0.1

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

∴ 6,96,150 = `"C"/(0.1)[(1 + 0.1)^4 - 1]`

∴ 6,96,150 x 0.1= C[(1.1)⁴ – 1]

∴ 69,615 = C[1.4641 – 1]
∴ 69,615 = C(0.4641)

∴ C = `(69, 615)/(0.4641)`
∴ C = 1,50,000
∴ Sum of ₹1,50,000 should be invested every year.