Test Index

Time Value of Money

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Question : 11 of 99

Marks: +1, -0

If

\text{₹}100

is deposited at the end of every month, the total amount accumulated after 20 years if the rate of interest is

12\%

compounded monthly is

98925
1,07,600
96460
86460

Solution:

Concept:

Future value of an ordinary annuity (end-of-period deposits) with monthly compounding.

Explanation:

Monthly deposit

R = ₹100

.

Number of months

n = 20 \times 12 = 240

.

Monthly interest rate

i = 12\% / 12 = 1\% = 0.01

.

Future value formula:

FV = R \times \frac{(1+i)^n - 1}{i}

.

Compute

(1.01)^{240} \approx 10.892553

.

Then

\frac{10.892553 - 1}{0.01} = \frac{9.892553}{0.01} = 989.2553

.

Multiply by ₹100:

FV = 100 \times 989.2553 = ₹98925.53 \approx ₹98925

.

Answer:

₹98,925

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