Test Index

Time Value of Money

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Question : 87 of 99

Marks: +1, -0

Rs. 10,000 is paid for ten years to pay off a loan, the loan amount if interest be

14\%

per annum compounded annually is

P(10,0.14)=5.21611)

Rs.5216.11
Rs.1917.13
Rs. 52,161.1
Rs. 19,171,3

Solution:

Concept:

The loan amount is the present value of an annuity of annual payments.

Explanation:

Annual payment = Rs. 10,000.

Number of years

n = 10

, interest rate

r = 14\% = 0.14

.

Given present value annuity factor

P(10, 0.14) = 5.21611

.

Loan amount = Annual payment

\times P(10, 0.14) = 10000 \times 5.21611 = 52161.1

.

Answer:

Rs. 52,161.1, which corresponds to option C.

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