CA Foundation Exam > CA Foundation Questions > A took a loan from B. The loan is to be repai...
Start Learning for Free
A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent?
Most Upvoted Answer
A took a loan from B. The loan is to be repaid in annual installments ...
Given Information:
- Loan amount taken by A from B
- Repayment of loan in annual installments of Rs. 2,000 each
- First installment to be paid after three years from today
- Last installment to be paid after eight years from today
- Discount rate of 8%
To find:
- Present value of the loan amount
Solution:
Step 1: Calculate the total number of installments to be paid
Total number of installments = 8 - 3 + 1 = 6
Step 2: Calculate the present value of each installment
Using the formula, Present value of an annuity = (1 - (1 + r)^-n) / r
where r = discount rate and n = number of periods
Present value of each installment = (1 - (1 + 0.08)^-6) / 0.08
= 4.623
Step 3: Calculate the present value of all installments
Present value of all installments = 4.623 x 2,000
= Rs. 9,246
Therefore, the present value of the loan amount is Rs. 9,246. This means that if B wants to invest the loan amount at a discount rate of 8%, then he should receive Rs. 9,246 today to be able to receive Rs. 2,000 annually for the next six years.
- Loan amount taken by A from B
- Repayment of loan in annual installments of Rs. 2,000 each
- First installment to be paid after three years from today
- Last installment to be paid after eight years from today
- Discount rate of 8%
To find:
- Present value of the loan amount
Solution:
Step 1: Calculate the total number of installments to be paid
Total number of installments = 8 - 3 + 1 = 6
Step 2: Calculate the present value of each installment
Using the formula, Present value of an annuity = (1 - (1 + r)^-n) / r
where r = discount rate and n = number of periods
Present value of each installment = (1 - (1 + 0.08)^-6) / 0.08
= 4.623
Step 3: Calculate the present value of all installments
Present value of all installments = 4.623 x 2,000
= Rs. 9,246
Therefore, the present value of the loan amount is Rs. 9,246. This means that if B wants to invest the loan amount at a discount rate of 8%, then he should receive Rs. 9,246 today to be able to receive Rs. 2,000 annually for the next six years.
Community Answer
A took a loan from B. The loan is to be repaid in annual installments ...
Years 1÷1.08 amount
(1) 0.9259 can not pay
(2) 0.8573 can not pay
(3) 0.7938 1587.6
(4) 0.7350 1470
(5) 0.6806 1361.2
(6) 0.6307 1261.4
(7) 0.5835 1161.4
(8) 0.5403 1080.54
total 7927.74
(1) 0.9259 can not pay
(2) 0.8573 can not pay
(3) 0.7938 1587.6
(4) 0.7350 1470
(5) 0.6806 1361.2
(6) 0.6307 1261.4
(7) 0.5835 1161.4
(8) 0.5403 1080.54
total 7927.74
Attention CA Foundation Students!
To make sure you are not studying endlessly, EduRev has designed CA Foundation study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in CA Foundation.
|
Explore Courses for CA Foundation exam
|
|
Similar CA Foundation Doubts
Top Courses for CA FoundationView all
A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent?
Question Description
A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent?.
A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent?.
Solutions for A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent? in English & in Hindi are available as part of our courses for CA Foundation.
Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent? defined & explained in the simplest way possible. Besides giving the explanation of
A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent?, a detailed solution for A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent? has been provided alongside types of A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent? theory, EduRev gives you an
ample number of questions to practice A took a loan from B. The loan is to be repaid in annual installments of Rs. 2,000 each. The first instalment is to be paid three years from today and the last one is to be paid 8 years from today? What is the value of loan today, using a discount rate of eight percent? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup