A company establishes a sinking fund to provide for payment of Rs 250000 debt,maturing in 4 years. Contribution to the fund are to be made at the end of each year. What is the amount of each annual deposit if the interest is 18% per annum.
Answer & explanation
Correct answer: option 3
The correct answer is option (3) : ₹47923.32
Given $A= ₹250000
$n= 4\, years $
$r= 18$%
$∴i=0.18$
Using formula,
$A=R\left[\frac{(1+i)^n-1}{i}\right]$
$250000= R\left[\frac{(1.18)^4-1}{0.18}\right]$
$R=\frac{250000×0.18}{(1.18)^4-1}$
Let $x =(1.18)^4$
Taking log on both sides, we get
$log\, x = 4\, log\, 1.18$
$= 4×0.0719$
$log\, x = 0.2876$
$x= antilog\, 0.2876$
$x= 1.939$
$R=\frac{45000}{1.939-1}=\frac{45000}{0.939}$
$R=₹47923.32$