What sum should be invested at the end of every year so as to accumula...
Calculation of Required Investment
To calculate the required investment at the end of every year, we can use the formula for the future value of an annuity:
FV = P * [(1 + r)^n - 1] / r
where FV is the future value, P is the periodic payment, r is the rate of interest, and n is the number of periods.
In this case, we know that:
- FV = Rs.7,96,870
- r = 10% compounded annually
- n = 10 years
By plugging these values into the formula, we can solve for P:
P = FV * r / [(1 + r)^n - 1]
P = Rs.7,96,870 * 0.1 / [(1 + 0.1)^10 - 1]
P = Rs.45,000 (rounded to the nearest thousand)
Therefore, an investment of Rs.45,000 at the end of every year for 10 years at a rate of 10% compounded annually will accumulate to Rs.7,96,870.
Explanation
The question requires us to find the periodic investment required to accumulate a certain amount over a specific period of time at a given rate of interest. To solve this problem, we can use the formula for the future value of an annuity, which relates the periodic investment to the future value of the investment.
In the formula, the future value is the amount that we want to accumulate, the rate of interest is the rate at which the investment grows, and the number of periods is the length of time over which the investment is made. The periodic investment is the unknown variable that we want to solve for.
By plugging in the given values for the future value, rate of interest, and number of periods, we can solve for the periodic investment required to achieve the desired future value. In this case, we find that an investment of Rs.45,000 at the end of every year for 10 years at a rate of 10% compounded annually will accumulate to Rs.7,96,870.