Multiple choice

Raja is 40 years old. He wishes his wife Rani to have Rs. 40 lakhs on his death. If his expectation of life is 30 years more and he starts making equal annual investments commencing now at 3% compound interest p.a., how much should he invest annually?

  1. Rs. 85,228

  2. Rs. 84,872

  3. Rs. 84,449

  4. Rs. 84,093
Reveal answer Fill a bubble to check yourself
D Correct answer
AI explanation

Using the present value of an annuity due formula, we evaluate the required annual investment based on a 3% interest rate over 30 years. This requires dividing the target sum by the respective annuity factor, which heavily discounts future payments to their present value. Calculating this financial series results in an approximate annual investment requirement. To achieve Rs. 40 lakhs in 30 years at 3% compound interest starting immediately, he should invest Rs. 84,093 annually.

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