Test Index

Time Value of Money

Question : 83 of 99

Marks: +1, -0

12 \%

Solution:

Concept:

Depreciation means the value reduces by a fixed percentage each year.

Explanation:

Let the value 3 years ago be

P

Annual depreciation is

12\%

, so each year the value becomes

100\% - 12\% = 88\% = 0.88

of the previous year's value.

After 3 years,

P \times (0.88)^3 = 68,150

Compute

(0.88)^3 = 0.88 \times 0.88 \times 0.88 = 0.681472

Thus

P = \frac{68,150}{0.681472} \approx 100,004

Answer:

Rs. 1,00,004 (Option B).

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