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Perpetuity, Sinking Funds & Bonds · Question 5 of 63

How much must the family put into the scholarship trust today?

Question 5

EasyOriginal question

A family sets up a trust to pay a scholarship of ₹15,000 at the end of every year, for ever. Money earns 6% a year.

How much must the family put into the scholarship trust today?

Options for question 5

Show the answer and explanation
CorrectNot quiteAnswer D

Correct answer: D

Explanation

  1. Present value of a perpetuity =Ri= \frac{R}{i}.

  2. 15,0000.06=2,50,000\frac{15{,}000}{0.06} = 2{,}50{,}000 rupees.

Worth noting

₹90,000 multiplies by 6 instead of dividing by 0.06.

Concept
Present value of a perpetuity
Typical time
90 s
Your time
—
The rule this testsPerpetuity
Practise this chapter →

Ten questions from Perpetuity, Sinking Funds & Bonds, at your own pace.

Practise this chapter →

Ten questions from Perpetuity, Sinking Funds & Bonds, at your own pace.