Sum
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]
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Solution
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.
Concept: Insurance and Annuity
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