A sum of ₹60,000 invested at r% compounded quarterly will provide payments at ₹600 each at the end of every three months. Then the value of r is :
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 4%
formula for present value of annuity,
$PV=P×\left[\frac{1-\left(1+\frac{r}{n}\right)^{-n}}{\frac{r}{n}}\right]$
$60,000=600×\left[\frac{1-\left(1+\frac{r}{4}\right)^{-4}}{\frac{r}{4}}\right]$
$\frac{100r}{4}=1-\left(1+\frac{r}{4}\right)^{-4}$
$\frac{100r}{4}=1-\frac{4}{4+r}$
$⇒r≃4\%$