What sum of money is needed to invest now, so as to get ₹5000 at the beginning of every month forever,if the money is worth 6% per annum compounded monthly?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → ₹10,05,000 **
Monthly interest rate = $\frac{6}{12}\% = 0.005$
Present value of a perpetuity due is
$PV = \frac{A(1+i)}{i}$
Here $A = 5000$ and $i = 0.005$
$PV = \frac{5000(1+0.005)}{0.005}$
$= \frac{5000 \times 1.005}{0.005}$
$= \frac{5025}{0.005}$
$= 1005000$
Thus, the required investment is ₹1005000.