naveed_786110
New member
- Joined
- May 10, 2015
- Messages
- 26
Ali would require a sum of Rs. 300,000 after three years from now and a sum of Rs. 500,000 after five years from now, for the purpose of education of his son. He is planning to deposit quarterly amounts in an investment scheme to get the desired amounts at the required time. If the rate of interest is 12% compounded quarterly, what amount should Ali deposit at the start of each quarter?
Sol:
This is how I solved it.
For this I made 2 accounts with investments of R1 and R2.
Since
Sn=R{(1+i)^n-1}/i x (1+i)
300,000 = R1 {(1+0.03)^12 -1 } / 0.03 x (1+0.03)
R1 = 20523
Similarly;
500,000 = R2 {(1+0.03)^20 -1 } / 0.03 x (1+0.03)
R2= 18065.87
So required sum is R1+R2 i.e; 38588.
But When I consult the solution, Its totally different approach. It says
The future value of Rs. 300,000 on completion of five years would be:
S=P(1+i)^n
= 300,000(1.03)^8=380031.02
It means if Rs. 300,000 had not been drawn after three years then at the end of investment period, Ali would had a sum of 380031.02+500,000=880,031.02
Using the same formula (as i used)
Sn=R{(1+i)^n-1}/i x (1+i)
880,031.02= R {(1+0.03)^20 -1 } / 0.03 x (1+0.03)
R = 31,797.07
Which of the solution is true? If my solution is false, what's wrong with it, what I am missing?
Sol:
This is how I solved it.
For this I made 2 accounts with investments of R1 and R2.
Since
Sn=R{(1+i)^n-1}/i x (1+i)
300,000 = R1 {(1+0.03)^12 -1 } / 0.03 x (1+0.03)
R1 = 20523
Similarly;
500,000 = R2 {(1+0.03)^20 -1 } / 0.03 x (1+0.03)
R2= 18065.87
So required sum is R1+R2 i.e; 38588.
But When I consult the solution, Its totally different approach. It says
The future value of Rs. 300,000 on completion of five years would be:
S=P(1+i)^n
= 300,000(1.03)^8=380031.02
It means if Rs. 300,000 had not been drawn after three years then at the end of investment period, Ali would had a sum of 380031.02+500,000=880,031.02
Using the same formula (as i used)
Sn=R{(1+i)^n-1}/i x (1+i)
880,031.02= R {(1+0.03)^20 -1 } / 0.03 x (1+0.03)
R = 31,797.07
Which of the solution is true? If my solution is false, what's wrong with it, what I am missing?