PRC-2 · Chapter 5 · Question 21 of 50
A company plans to deposit Rs. 5,000 at the end of each year for 4 years into a sinking fund earning 6% annually. What will the future value of this fund be?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Rs. 21,873
Explanation
Using the FV of an ordinary annuity formula: FV = R * [(1 + i)^n - 1] / i. FV = 5000 * [(1.06)^4 - 1] / 0.06 = 5000 * [1.26247 - 1] / 0.06 = 5000 * 4.3746 = Rs. 21,873.
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