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A father has setup a sinking fund in order to have ₹ 2,40,000 after 10 years for his daughter's marriage. How much amount should he set aside bi-annually into an account paying 5% per annum compounded half-yearly?

[given : (1.025)20≈1.6(1.025)^{20}\approx 1.6]

Solution

✅ Correct Option: 2

Half-yearly rate i=0.025i = 0.025 and number of periods n=20n = 20.

For a sinking fund, FV=P(1+i)n−1iFV = P\dfrac{(1+i)^n-1}{i}.

So 240000=P1.6−10.025=24P240000 = P\dfrac{1.6-1}{0.025} = 24P, giving P=P = Rs. 10,000.

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