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Raja aged 40 wishes his wife Rani to have 40 lakh st his death. If his expectations of life is another 30 years and he starts making equal annual investment commencing now at 3% compound interest p.a how much should he invests annually. Pls do tell which formula to apply in this sum.?
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Raja aged 40 wishes his wife Rani to have 40 lakh st his death. If his...
The formula of future value of annuity will be used here because the bulk amount which raja wishes to have will be in future.
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Raja aged 40 wishes his wife Rani to have 40 lakh st his death. If his...
Calculation of Annual Investment for Raja's Wife

Given:

  • Raja wishes his wife Rani to have 40 lakh at his death.

  • Raja's expectations of life is another 30 years.

  • Raja starts making equal annual investment commencing now at 3% compound interest p.a.



To find: How much should Raja invest annually to achieve his goal?

Formula:

  • Compound Interest Formula: A = P(1 + r/n)^nt

  • Present Value Formula: P = A/(1 + r/n)^nt



Solution:

  • Let the annual investment be x.

  • Amount at Raja's death = 40 lakhs (given)

  • Let's calculate the future value of the investment in 30 years.

  • Using compound interest formula: A = P(1 + r/n)^nt

  • A = x(1 + 0.03/1)^30

  • A = x * 2.427

  • A = 2.427x

  • Now, using present value formula to calculate the annual investment required to reach 40 lakhs:

  • P = A/(1 + r/n)^nt

  • 40 lakhs = 2.427x/(1 + 0.03/1)^30

  • 40 lakhs = 2.427x * 0.295

  • 40 lakhs = 0.715 * 2.427x

  • x = 19,318



Answer:
Raja should invest Rs. 19,318 annually to achieve his goal of providing 40 lakhs to his wife at his death, assuming an annual interest rate of 3% compounded annually.
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Raja aged 40 wishes his wife Rani to have 40 lakh st his death. If his expectations of life is another 30 years and he starts making equal annual investment commencing now at 3% compound interest p.a how much should he invests annually. Pls do tell which formula to apply in this sum.?
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Raja aged 40 wishes his wife Rani to have 40 lakh st his death. If his expectations of life is another 30 years and he starts making equal annual investment commencing now at 3% compound interest p.a how much should he invests annually. Pls do tell which formula to apply in this sum.? 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 Raja aged 40 wishes his wife Rani to have 40 lakh st his death. If his expectations of life is another 30 years and he starts making equal annual investment commencing now at 3% compound interest p.a how much should he invests annually. Pls do tell which formula to apply in this sum.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Raja aged 40 wishes his wife Rani to have 40 lakh st his death. If his expectations of life is another 30 years and he starts making equal annual investment commencing now at 3% compound interest p.a how much should he invests annually. Pls do tell which formula to apply in this sum.?.
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