a company sets aside a sum of rs 5000 annually for 10 year's to pay off a debenture issue of rs 60,000. if the fund accumulates at 5% per year compound interest, fund the surplus after full redemption of the debenture issue. with solutions
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A company sets aside a sum of rs.5000 annually for 10 years to pay off a debentures issue of rs.60000. if the fund ...
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Answer:
P= Principal investment amount = Rs. 5000
T= Tenure = 10 years.
R = Annual Interest Rate = 5% =.05
N=The number of times that interest compounds in a year = 1
Consider
The future value of the investment, including interest is = A
We know that,
A = P x (1 + R/N) (N x T)
⇒A = 5000 x (1 + .05/1) (1 x 10)
⇒A = 5000 x (1.05)^10 = 8144
Therefore, The value of the investment, including interest is =Rs. 8144
Total amount to pay off = Rs. 60000
To fulfill the value = Rs.(60000-5844)= Rs. 54156 is required.
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