Multiple choice

Leila aspires to buy a car Rs. 10,00,000 after 5 years. What is the minimum amount in Rupees that she should deposit now in a bank which offers 10% annual rate of interest, if the interest was compounded annually?

  1. 5,00,000

  2. 6,21,000

  3. 6,66,667

  4. 7,50,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Present Value = Future Value / (1 + r)^t. PV = 10,00,000 / (1.1)^5 = 10,00,000 / 1.61051 = 620,921. The closest option is 6,21,000.

AI explanation

Using the present value formula for compound interest, Principal equals Amount divided by (1 plus Rate divided by 100) raised to the time in years, we substitute the target amount of Rs. 10,00,000, rate of 10%, and time of 5 years. The calculation is 10,00,000 divided by 1.1 raised to the fifth power, which is 1.61051, resulting in approximately Rs. 6,21,000.

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