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An owner of a building sets aside Rs. 1,500 as sinking fund in the bank every year, from the rent he gets from the building. He wishes to rebuild another portion of the building after 25 years. If the rate of interest of the bank is 7%, what will be the amount available with him after 25 years?

Note: Take 1.0725 = 5.43


1. Rs. 85,625
2. Rs. 94,929
3. Rs. 78,965
4. Rs. 75,324

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Best answer
Correct Answer - Option 2 : Rs. 94,929

Concept:

As per sinking found method, Further work of money is given as:

\(F = A\left( {\frac{{{{\left( {1 + i} \right)}^N} - 1}}{i}} \right)\)

Where ‘F’ is future work i.e. Amount available to owner after 25 tears.

‘A’ is annual amount which is being sets aside as sinking fund by owner every year.

i → rate of interest

N → Period considered.

Calculation:

Given:

N = 25 tears, A = Rs. 1500 /-

i = 7%

\(F = 1500 \times \left[ {\frac{{{{\left( {1 + .07} \right)}^{25}} - 1}}{{.07}}} \right]\)

\(F = 1500 \times \left[ {\frac{{5.43 - 1}}{{.07}}} \right]\) = Rs. 94,929/-

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