An item is bought on a condition that three equal instalments of ₹3,993 are to be paid at a rate of 10% compound interest, compounded annually. The cost of the item is:
Show answer & explanation
Correct answer: D
Explanation
The correct answer is option 4 i.e. ₹9,930.
Present Value (PV) = P/(1 + r)1 + P/(1 + r)2 + P/(1 + r)3
PV = 3993/1.10 + 3993/(1.10)2 + 3993/(1.10)3
⇒ 3621.82 + 3300.25 + 2998.50 = ₹9919 approx