CA Foundation P3 · Chapter 4 · Question 8 of 10
A company wants to accumulate ₹5,00,000 in 5 years through equal deposits made at the end of each year into a sinking fund earning 8% per annum compounded annually. The annual deposit (to the nearest paisa) is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) ₹85,228.23
Explanation
Sinking fund deposit = FV / [((1 + i)ⁿ − 1)/i]. (1.08)⁵ = 1.469328, so the factor = 0.469328/0.08 = 5.866601. Deposit = 5,00,000 / 5.866601 = ₹85,228.23 (rounded to the paisa). Using the present-value factor 3.992710 instead gives ₹1,25,228.23, and treating deposits as at the beginning of the year gives ₹78,915.03.
More Mathematics of Finance MCQs
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