CA Foundation Exam > CA Foundation Questions > A company borrows Rs. 10000 on condition to r...
Start Learning for Free
A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear is
- a)14.2 yrs.
- b)10 yrs.
- c)12 yrs.
- d)none of these
Correct answer is option 'A'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Verified Answer
A company borrows Rs. 10000 on condition to repay it with compound int...
solutions
Present value of annuity regular
pv=A* [((1+I)^n -1)/(I*(1+I)^n]
10000=1000* [((1+0.05)^n -1)/(0.05*(1+0.05)^n]
(1.05)^n-0.5*(1.05)^n=1
(1.05)^n=2
Taking log both sides
n=log2/log 1.05r
Answer n= 14.2 years
Most Upvoted Answer
A company borrows Rs. 10000 on condition to repay it with compound int...
Given:
Principal (P) = Rs. 10000
Rate of interest (R) = 5% p.a
Annual installment (A) = Rs. 1000
To find: Number of years it will take to clear the debt
Formula used:
Compound Interest formula:
A = P (1 + R/100)ⁿ
where,
A = Final amount
P = Principal
R = Rate of interest
n = Number of years
Calculations:
Let the number of years be 'n'
After 1st year:
Amount = Principal + Interest - Installment
= 10000 + (5/100)*10000 - 1000
= 4600
After 2nd year:
Amount = Previous amount + Interest - Installment
= 4600 + (5/100)*4600 - 1000
= 4260
Similarly, we can calculate the amount for the 3rd year, 4th year, and so on.
We need to find the value of 'n' such that the amount becomes zero.
After n years:
Amount = 0
P (1 + R/100)ⁿ = A * ((1 + R/100)ⁿ - 1) * (100/R)
10000 * (1 + 5/100)ⁿ = 1000 * ((1 + 5/100)ⁿ - 1) * (100/5)
20 (1.05)ⁿ = (1.05ⁿ - 1)
Dividing both sides by 20, we get:
(1.05)ⁿ/20 = (1.05ⁿ - 1)/20
Using trial and error method, we can find that n = 14.2 years approximately.
Therefore, the number of years it will take to clear the debt is approximately 14.2 years.
Hence, the correct option is (a) 14.2 years.
Principal (P) = Rs. 10000
Rate of interest (R) = 5% p.a
Annual installment (A) = Rs. 1000
To find: Number of years it will take to clear the debt
Formula used:
Compound Interest formula:
A = P (1 + R/100)ⁿ
where,
A = Final amount
P = Principal
R = Rate of interest
n = Number of years
Calculations:
Let the number of years be 'n'
After 1st year:
Amount = Principal + Interest - Installment
= 10000 + (5/100)*10000 - 1000
= 4600
After 2nd year:
Amount = Previous amount + Interest - Installment
= 4600 + (5/100)*4600 - 1000
= 4260
Similarly, we can calculate the amount for the 3rd year, 4th year, and so on.
We need to find the value of 'n' such that the amount becomes zero.
After n years:
Amount = 0
P (1 + R/100)ⁿ = A * ((1 + R/100)ⁿ - 1) * (100/R)
10000 * (1 + 5/100)ⁿ = 1000 * ((1 + 5/100)ⁿ - 1) * (100/5)
20 (1.05)ⁿ = (1.05ⁿ - 1)
Dividing both sides by 20, we get:
(1.05)ⁿ/20 = (1.05ⁿ - 1)/20
Using trial and error method, we can find that n = 14.2 years approximately.
Therefore, the number of years it will take to clear the debt is approximately 14.2 years.
Hence, the correct option is (a) 14.2 years.
Free Test
FREE
| Start Free Test |
Community Answer
A company borrows Rs. 10000 on condition to repay it with compound int...
Try though options,
a) 14.2
b) 10
c) 12
d) none
formula, 1÷(1+I)^n.
on calculator,
1÷(1+0.05) ^ let op a) 14 as n,
press = 14 times from one,
press Grand total(G.T)
press M+,
put p.v (10000)
÷ MRC= 1010.200 which is equal to 14.2 years.
a) 14.2
b) 10
c) 12
d) none
formula, 1÷(1+I)^n.
on calculator,
1÷(1+0.05) ^ let op a) 14 as n,
press = 14 times from one,
press Grand total(G.T)
press M+,
put p.v (10000)
÷ MRC= 1010.200 which is equal to 14.2 years.
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 company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer?
Question Description
A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? 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 company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer?.
A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? 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 company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer?.
Solutions for A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? 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 company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer?, a detailed solution for A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? has been provided alongside types of A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? 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