Question

5. A company wants to set up a reserve which will help the company to have an annual equivalent amount of 10,00,000 US. Dollars for the next 20 years towards its employees welfare measures. The reserve is assumed to grow at the rate of 15% annually. Find the single-payment that must be made now as the reserve amount. 6. A bank gives a loan to a company to purchase an equipment worth 10,00,000 US. Dollars at an interest rate of 18% compounded annually. This amount should be repaid in 15 yearly equal installments. Find the installment amount that the company has to pay to the bank. 7. A person is planning for his retired life. He has 10 more years of service. He would like to deposit 20% of his salary, which is 4,000 US. Dollars at the end of the first year, and thereafter he wishes to deposit the amount with an annual increase of Rs. 500 for the next 9 years with an interest rate of 15%. Find the total amount at the end of the 10th year of the above series.

Answer 1

5. Given, A = $10,00,000
i = 15%
n = 20 years

P = A(P/A, i, n)

=10,00,000 (P/A, 15%, 20)

= 10,00,000 (6.2593)

= 62,59,300

The amount of reserve which must be set-up now is equal to $62,59,300.