Multiple choice

A person bought a house paying Rs. 20,000 cash upfront and Rs. 4000 at the end of each year for 25 years at 5% p.a. compound interest. The full cash down price of the house was

  1. Rs. 75,000

  2. Rs. 76,000

  3. Rs. 76,376

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

This is a present value of an annuity problem. PV = 20000 + 4000 * [(1 - (1+0.05)^-25) / 0.05]. PV = 20000 + 4000 * 14.0939 = 20000 + 56375.6 = 76375.6.

AI explanation

Calculate the present value of the 25 yearly installments of Rs. 4000 at 5% compound interest using the annuity present value formula, which yields Rs. 56,376. Add the Rs. 20,000 upfront cash payment to this present value, making the total cash down price of the house Rs. 76,376.

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