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Raja aged 40 wishes his wife Rani to have ₹40lakhs at his death. If his expectations of life is another 30 years and he starts making equal annual investments commencing now at 3% compound interest p a. How much should he invest annually?
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Raja aged 40 wishes his wife Rani to have ₹40lakhs at his death. If hi...
Calculation of Annual Investment for Raja


Given:


  • Raja's age: 40

  • Wife Rani to have ₹40 lakhs at his death

  • Raja's expected life: 30 years

  • Rate of interest: 3% p.a.



Calculation:

To calculate the annual investment that Raja needs to make, we will use the future value formula:

FV = P * ((1 + r)^n - 1) / r


  • FV - Future Value (₹40 lakhs)

  • P - Annual Investment

  • r - Rate of Interest (3% p.a. or 0.03)

  • n - Number of Years (30 years)


Plugging in the values, we get:

₹40 lakhs = P * ((1 + 0.03)^30 - 1) / 0.03

Solving for P, we get:

P = ₹40 lakhs * 0.03 / ((1 + 0.03)^30 - 1)

P = ₹40 lakhs * 0.03 / 0.674

P = ₹17,821


Answer:

Raja needs to invest ₹17,821 annually to ensure that his wife Rani receives ₹40 lakhs at his death, assuming a 3% p.a. rate of interest and a 30-year investment horizon.
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Raja aged 40 wishes his wife Rani to have ₹40lakhs at his death. If his expectations of life is another 30 years and he starts making equal annual investments commencing now at 3% compound interest p a. How much should he invest annually?
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