The money needed to invest now, so as to get Rs. 7500 at the beginning of each month forever (starting from the current month) if the money is worth 9% per annum compounded monthly is,
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 10,07,500
Payments that go on forever form a perpetuity. Here the first payment is made at once (at the beginning of the current month), so it is a perpetuity due: the first payment R plus an ordinary perpetuity \(\frac{R}{i}\).
The rate per month is
\( \displaystyle i = \frac{9}{12}\% = 0.0075 \)
So the money needed is
\( \displaystyle P = R + \frac{R}{i} = 7500 + \frac{7500}{0.0075} \)
\(= 7500 + 1000000\)
\(= 1007500\)
That is Rs. 10,07,500.
CBSE Applied Mathematics (Class XII):
Perpetuity
