Ramesh plans to save some amount required after 10 years for higher studies of his son. He expects the cost of these studies to be Rs.1,00,000. How much should be save at the beginning of each year to accumulate this amount at the end of 10 years, if the interest rate is 12% compounded annually. (Given $(1.12)^{11}-3.477$)

Rs. 5091

The correct answer is Option (3) → Rs. 5091

Given:

Future Value (FV) = ₹1,00,000

Interest rate (i) = 12% = 0.12

Number of years (n) = 10

Let the annual saving be R, deposited at the beginning of each year (annuity due).

Future value of an annuity due:

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

Substitute values:

1,00,000 = R * $\frac{(1 + 0.12)^{10} - 1}{0.12} * 1.12$

$(1.12)^{10} ≈ 3.10585$

R = 1,00,000 / 19.653 ≈ 5088.6

Answer: ₹5,088.60 should be saved at the beginning of each year