GATE ECE 2018 | GA Question: 6

Question

Leila aspires to buy a car worth 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?

• A. $5,00,000$
• B. $6,21,000$
• C. $6,66,667$
• D. $7,50,000$

Answer 1

We don't know the principal amount

So, let's assume the principal amount be P.

After getting an annual rate of interest as 10% which is compounded annually,5 years later the amount should be 10,00,000 

So, $P(1 + \dfrac{10}{100})^5$ = 10,00,000

      $P(\dfrac{11}{10})^5$ = $10^6$

      $P$ = $\dfrac{10^6 * 10^5}{(11)^5}$

      $P$ = $\dfrac{10 ^ {11}}{11^5}$

      $P$ = 620921.323 ≅ 621000 Option B)