Question

Let a person invest a fixed sum at the end of each month in an account paying interest 12%per year compounded monthly. it the future value of this annuity after the 12th payment is rs.55,000 then the amount invested every month is?

A. 4837
B. 4637
C. 4337
D. 3337

Answer 1

The amount invested every month to obtain a future value of RS.55,000 after 12 payments at 12% interest per year compounded monthly is approximately RS.4337 (option C).

Step-by-step explanation:

To find the amount invested every month given that the future value of the annuity after the 12th payment is RS.55,000 with an account paying 12% interest per year compounded monthly, we use the future value of an ordinary annuity formula:

FV = P × {[(1 + r)^n - 1] / r}

Where:

• FV is the future value of the annuity (55,000)
• P is the monthly payment amount we need to find
• r is the monthly interest rate (0.12/12)
• n is the total number of payments (12)

Plugging these values into the formula:

55,000 = P × {[(1 + 0.01)^12 - 1] / 0.01}

After calculating, we can find P as follows:

P = 55,000 / {[(1 + 0.01)^12 - 1] / 0.01}

P = 55,000 / 0.12675

P ≈ 4337

The monthly investment amount is approximately RS.4337.