A person creates a sinking fund to accumulate ₹60,000 in 5 years to buy a bike. The amount to be deposited at the end of every quarter with a 12% rate of interest compounded quarterly is :
$\left(Use \frac{0.03}{(1.03)^{20}-1}=0.0372\right)$
Answer & explanation
Correct answer: option 2
Amount required $=60000$.
Rate of interest $=12\%$ per annum compounded quarterly.
Rate per quarter $=3\%=0.03$.
Time $=5$ years $=20$ quarters.
Sinking fund formula:
$S=R\left(\frac{(1+i)^n-1}{i}\right)$
So
$R=S\left(\frac{i}{(1+i)^n-1}\right)$
Given $\frac{0.03}{(1.03)^{20}-1}=0.0372$.
$R=60000\times0.0372$
$R=2232$
final answer: ₹2232 per quarter