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 Written as per the revised syllabus prescribed by the Maharashtra State Board
of Secondary and Higher Secondary Education, Pune.

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PERFECT

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MATHEMATICS AND STATISTICS – II

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STD. XII COMMERCE

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Salient Features
• Precise Theory for every Topic.
• Exhaustive coverage of entire syllabus. O
• Topic-wise distribution of all textual questions and practice problems at the
beginning of every chapter.
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• Relevant and important formulae wherever required.
• Covers answers to all Textual Questions.
• Practice problems based on Textual Exercises and Board Questions
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(March 08  July 18) included for better preparation and self evaluation.
• Multiple Choice Questions at the end of every chapter.
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• Two Model Question papers based on the latest paper pattern.

• Includes Board Question Papers of 2017, 2018 and March 2019.
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Printed at: Jasmine Art Printers Pvt. Ltd., Navi Mumbai

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© Target Publications Pvt. Ltd.

No part of this book may be reproduced or transmitted in any form or by any means, C.D. ROM/Audio Video Cassettes or electronic, mechanical
including photocopying; recording or by any information storage and retrieval system without permission in writing from the Publisher.

Balbharati Registration No.: 2018MH0022 P.O. No. 151504

TEID: 13195
 Preface
Mathematics is not just a subject that is restricted to the four walls of a classroom. Its philosophy and
applications are to be looked for in the daily course of our life. The knowledge of mathematics forms the
backbone of all sciences and it is an inseparable part of human life.
With the same thought in mind, we present to you "Std. XII Commerce: Mathematics and Statistics

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Part - II" a complete and thorough book with a revolutionary fresh approach towards content and thus laying a
platform for an in depth understanding of the subject. This book has been written according to the latest syllabus
and includes two model question papers based on the latest paper pattern.

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At the beginning of every chapter, topic-wise distribution of all textual questions including practice
problems have been provided for simpler understanding of various types of questions. Every topic included in the
book is divided into sub-topics, each of which are precisely explained with the associated theories. Also, practice

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problems based upon solved exercises are included which not only aid students in self evaluation but also provide
them with plenty of practice. We've also ensured that each chapter ends with a set of Multiple Choice Questions
so as to prepare students for competitive examinations.
We are sure this study material will turn out to be a powerful resource for students and facilitate them in
understanding the concepts of Mathematics in the most simple way.
The journey to create a complete book is strewn with triumphs, failures and near misses. If you think

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we've nearly missed something or want to applaud us for our triumphs, we'd love to hear from you.

Please write to us on: [email protected]

Yours faithfully,
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Best of luck to all the aspirants!
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Publisher

Edition: Second
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Disclaimer
This reference book is transformative work based on textual contents published by the Maharashtra State Board of Secondary and Higher Secondary Education, Pune. We the
publishers are making this reference book which constitutes as fair use of textual contents which are transformed by adding and elaborating, with a view to simplify the same to
enable the students to understand, memorize and reproduce the same in examinations.

This work is purely inspired upon the course work as prescribed by the Maharashtra State Board of Secondary and Higher Secondary Education, Pune. Every care has been taken
in the publication of this reference book by the Authors while creating the contents, the Authors and the Publishers shall not be responsible for any loss or damages caused to any
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© reserved with the Publisher for all the contents created by our Authors.

No copyright is claimed in the textual contents which are presented as part of fair dealing with a view to provide best supplementary study material for the benefit of students.
 BOARD PAPER PATTERN
Time: 3 Hours Total Marks: 80

1. One theory question paper of 80 marks and duration for this paper will be 3 hours.
2. For Mathematics and Statistics, (Commerce) there will be only one question paper and two answer papers.

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Question paper will contain two sections viz. Section I and Section II. Students should solve each section
on separate answer books.

Section - I

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Q.1. This Question will have 8 sub-questions, each carring two marks. [12 Marks]
Students will have to attempt any 6 out of the given 8 sub-questions.

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Q.2. This Question carries 14 marks and consists of two sub parts (A) and (B) as follows: [14 Marks]
(A) It contains 3 sub-questions of 3 marks each.
Students will have to attempt any 2 out of the given 3 sub-questions.
(B) It contains 3 sub-questions of 4 marks each.
Students will have to attempt any 2 out of the given 3 sub-questions.
Q.3. This Question carries 14 marks and consists of two sub parts (A) and (B)as follows: [14 Marks]

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(A) It contains 3 sub-questions of 3 marks each.
Students will have to attempt any 2 out of the given 3 sub-questions
(B) It contains 3 sub-questions of 4 marks each.
Students will have to attempt any 2 out of the given 3 sub-questions.
O Section - II
Q.4. This Question will have 8 sub-questions, each carring two marks.
Students will have to attempt any 6 out of the given 8 sub-questions.
[12 Marks]
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Q.5. This Question carries 14 marks and consists of two sub parts (A) and (B) as follows: [14 Marks]
(A) It contains 3 sub-questions of 3 marks each.
Students will have to attempt any 2 out of the given 3 sub-questions.
(B) It contains 3 sub-questions of 4 marks each.
Students will have to attempt any 2 out of the given 3 sub-questions.
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Q.6. This Question carries 14 marks and consists of two sub parts (A) and (B) as follows: [14 Marks]
(A) It contains 3 sub-questions of 3 marks each.
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Students will have to attempt any 2 out of the given 3 sub-questions

(B) It contains 3 sub-questions of 4 marks each.
Students will have to attempt any 2 out of the given 3 sub-questions.
Evaluation Scheme for Practical
i. Duration for practical examination for each batch will be one hour.
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ii. Total marks : 20

MARKWISE DISTRIBUTION
Unitwise Distribution of Marks
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Section - I
Sr. No. Units Marks with Option
1. Mathematical Logic 08
2. Matrices 08
3. Continuity 08
4. Differentiation 08
5. Application of Derivative 10
6. Integration 08
7. Definite Integrals 08
Total 58
 Unitwise Distribution of Marks
Section - II
Sr. No. Units Marks with Option
Commercial Arithmetic:
1. 13
 Ratio, Proportion, Partnership
 Commission, Brokerage, Discount

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 Insurance, Annuity
2. Demography 08
3. Bivariate Data Correlation 08

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4. Regression Analysis 07
5. Random Variable and Probability Distribution 08
6. Management Mathematics 14

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Total 58
Weightage of Objectives
Sr. No. Objectives Marks Marks with Option Percentage
1. Knowledge 08 13 10.00
2. Understanding 22 32 27.50

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3. Application 32 45 40.00
4. Skill 18 26 22.50
Total 80 116 100.00

Sr. No.
1.
Types of Questions
Objective Type
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Weightage of Types of Questions
Marks
24
Marks with Option
32
Percentage
30
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2. Short Answer 24 36 30
3. Long Answer 32 48 40
Total 80 116 100.00
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No. Topic Name Page No.

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1. Ratio, Proportion and Partnership 1

2. Commission, Brokerage and Discount 23
3. Insurance and Annuity 46
4. Demography 70
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5. Bivariate Frequency Distribution and Correlation 98

6. Regression Analysis 152
7. Random Variable and Probability Distribution 187
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8. Linear Inequations and Linear Programming 249

9. Assignment Problem and Sequencing 368
Model Question Paper - I 428
Model Question Paper - II 431
Board Question Paper – March 2017 433
Board Question Paper – July 2017 436
Board Question Paper – March 2018 438
Board Question Paper – July 2018 441
Board Question Paper – March 2019 443
 Std. XII : Commerce (Maths - II)

03 Insurance and Annuity

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Type of Problems Exercise Q. Nos.

3.1 Q.9, 12, 14

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Practice Problems
Life Insurance Q.5, 6
(Based on Exercise 3.1)

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Miscellaneous Q.5, 12
3.1 Q.1 to 8, 10, 11, 13

Practice Problems
Q.1 to 4

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(Based on Exercise 3.1)
General Insurance
Miscellaneous Q.1, 2, 3, 4, 6, 7, 8, 9, 10, 11, 13
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Practice Problems
(Based on Miscellaneous)
Q.1, 2, 3
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3.2 Q.1 to 10, Q. 14, 15

Practice Problems
Q.1 to 6, 8
(Based on Exercise 3.2)
Immediate Annuity
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Miscellaneous Q.14, 15, 16, 17, 18, 19, 20, 22

Practice Problems
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Q.4, 5, 6, 8
(Based on Miscellaneous)
3.2 Q.11, 12, 13

Practice Problems
Annuity Due Q.7
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(Based on Exercise 3.2)

Miscellaneous Q.23
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3.2 Q.16

Miscellaneous Q.21, 24
Sinking Fund
Practice Problems
Q.7
(Based on Miscellaneous)

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 Chapter 03: Insurance and Annuity
Syllabus:
3.1 Fire, Marine and Accident Insurance
3.1 Fire, Marine and Accident Insurance,
1. Fire Insurance:
3.2 Annuity: Various Terminologies of Annuity, In this type of insurance, property like
Annuity Due, Sinking Fund buildings, godowns containing goods,
factories, etc. can be insured against loss due

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Introduction to fire.
Insurance is nothing but creation of some security or Property Value:
monetary protection against any possible loss or The value of entire property is called Property

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damage to the life or property of a person. Value.
Policy Value:
It offers protection against contingencies such as The value of the property insured is called

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fire, earthquake, flood, burglary, etc., which cause Policy Value.
loss to the life of a person, property, vehicles, etc. Premium:
Insurance is a legal document of the agreement or The amount paid to the insurance company to
contract between the insurance company (insurer) get the property insured is called Premium.
and the person who insures (insured). The period for the fire insurance policy is one

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year and the premium rates are expressed as
There are two types of insurance:
percentage of the value of the property insured.
1. Life Insurance: The value of damage is called “loss” and the
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Under this insurance, a person pays a certain amount which the insured can demand under
instalment of money (premium) periodically the policy is called “claim”.
to the life insurance company so as to get Claim Policy value
 =
insured for his life. The period may be of a loss Property value
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month, a quarter, a year, etc.
Policy value
 Claim =  Loss
In this policy, the insured gets a guarantee Property value
from the insurance company to receive a
definite sum of money after he has attained a 2. Accident Insurance:
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certain age or maturity or on his death. This Under such insurance, a person can insure his
amount is called Policy Value. cars, trucks, two wheelers, etc. against damage
caused due to accidents or unforseen
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2. General Insurance: calamities. The policy also has the liability of

All types of insurance except the life the insured person to third parties involved in
insurance are covered by general insurance. the accident. The period of such policies is
Under general insurance, a person can insure one year.
his property like buildings, factories, godowns 3. Marine Insurance:
containing goods against loss due to fire, This type of insurance covers the risk of
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earthquake, flood etc. damage in the transport of goods by sea. The

Vehicles can also be insured against damage premium of the policy depends upon the value
due to accidents. of the ship and its cargo. The period of the
policy is same as the period of the journey.
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Here, the insurance company guarantees to The claims are calculated by the same method
pay compensation in proportion that exists as that of fire insurance.
between the policy value and property value in Note:
case of loss or damage. 1. Policy value is calculated on property value at
given percentage.
The insurer undertakes to pay only the actual 2. Premium is calculated on policy (insured)
amount of loss suffered by the insured. value.i.e.,
Note: The insured person cannot make profit Amount of Rateof premium
=  policy value
out of insurance. premium 100
47
 Std. XII : Commerce (Maths - II)
3. Agent’s commission is calculated on amount Now, amount of premium = 0.9% of policy value
of premium i.e., 0.9
=  1,80,000
Agent 's Rateof commission 100
=  premium
commission 100 = ` 1,620
4. Property value  gives
 policy value Also, agent’s rate of commission is 15% of the

gives
 premium 
gives
 agent’s premium.

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commission. 15
 agent’s commission = 1620
100
Exercise 3.1 = ` 243

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 premium paid by owner of the shop is ` 1,620
1. Find the premium on property worth
and agent’s commission is ` 243.
` 12,50,000 at ` 3% if

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(i) the property is fully insured [Mar 14] 3. A person insures his office valued at
(ii) the property is insured to the extent of ` 2,00,000 for 80% of its value. He pays
80% of its value. ` 5,000 as premium. Find the rate of
Solution: premium. If the agent gets commission at
Given, property value = ` 12,50,000, 11%, find his commission.
rate of premium = 3% Solution:

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i. When property is fully insured, Given, property value = ` 2,00,000,
Here, property value = policy value premium = ` 5,000 and rate of commission = 11%
 Policy value = ` 12,50,000 Since, the person insures 80% of its property value.
Now, amount of premium = 3% of policy value 80
=
3
100
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 12,50,000
= ` 37,500
 Policy value =
100
 2,00,000
= ` 1,60,000
Rateof premium
Now, amount of
premium =  policy value
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 amount of premium is ` 37,500. 100
ii. When property is insured to 80% of it’s value. Rateof premium
 5,000 =  1,60,000
Here, policy value = 80% of property value 100
80 100  5,000
=  12,50,000  Rate of premium =
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100 1,60,000
= ` 10,00,000 = 3.125%
Now, amount of premium = 3% of policy value Also, agent’s rate of commission is 11% of the premium.
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3
=  10,00,000  agent’s commission =
11
 5000
100 100
= ` 30,000 = ` 5,50
 amount of premium is ` 30,000.  rate of premium is 3.125% and agent’s
2. A shop is valued at ` 2,40,000 for 75% of its commission is ` 550.
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value. If the rate of premium is 90 paise 4. A building is insured for 80% of its value.
percent, find the premium paid by the The annual premium at 70 paise percent
owner of the shop. [Mar 18] amounts to ` 2,800. Fire damaged the
If an agent gets commission at 15% of the building to the extent of 60% of its value.
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premium, find the agent’s commission. How much can be claimed under the policy?
Solution: [Oct 15]
Given, property value = ` 2,40,000, Solution:
rate of premium = 90 paise % = ` 0.9 % Let the property value of building be ` x.
Since, the shop is insured for 75% of its value. Since, the building is insured for 80% of its value.
 policy value = 75% of property value.  Policy value = 80% of property value
75 80 4x
 policy value =  2,40,000 = x =`
100 100 5
= ` 1,80,000

48
 Chapter 03: Insurance and Annuity
Now, annual premium is ` 2,800 at 70 paise percent 5
6. A cargo of rice was insured at % to cover
(` 0.7%). 8
 amount of premium = 0.7% of policy value, 80% of its value. The premium paid was
0.7 4 x ` 5,250. If the rice was worth ` 21 per kilo,
 2,800 = 
100 5 how many kilos of rice did the cargo
2800  100  5 contain?
 x=

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0.7  4 Solution:
 x = ` 5,00,000 Let property value of the cargo be ` x.
 property value of the building is ` 5,00,000 Since, the cargo was insured for 80% of its value.

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4 x 4  5, 00, 000  Policy value = 80% of property value
and policy value = =
5 5 80 4x
= x =`
= ` 4,00,000. 100 5

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Given, fire damaged the building to the extent of 60%. 5
 loss = 60% of property value Given, rate of premium = % and amount of
8
60 premium = ` 5,250
=  5,00,000 = ` 3,00,000
100 5
Insured Value Since, amount of premium = % of policy value
Since, claim =  Loss 8

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Property Value 5 1 4x
 5,250 =  
4,00,000 8 100 5
 claim =  3,00,000
5,00,000 5, 250  8  100
 x=

5.
= ` 2,40,000

Stock worth ` 3,75,000 was insured for

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` 2,40,000 can be claimed under the policy. 

4
x = ` 10,50,000
property value of cargo is ` 10,50,000.
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` 2,25,000. Stock worth ` 1,50,000 was i.e., cargo contains rice worth ` 10,50,000
burnt completely due to fire and the But, rice was worth ` 21 per kilo.
balance was reduced to 75% of its value. Value of the cargo
What sum can be claimed under the policy?  Capacity of the cargo =
Price of 1kg rice
Solution:
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Given, stock (property) value = ` 3,75,000, 10,50, 000

= = 50,000 kg
policy value = ` 2,25,000 21
Now, stock worth ` 1,50,000 were burnt completely  The cargo contains 50,000 kg of rice.
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due to fire.
 remaining stock = stock value – burned stock 7. 30,000 articles costing ` 200 per dozen were
= 3,75,000 – 1,50,000 insured against fire for ` 1.20 lakh. If 20% of
= ` 2,25,000 the articles were completely burnt and
This remaining stock was reduced to 75% of another 3,600 articles were damaged to
its value. i.e., 25% loss occurred. the extent of 80 % of their value, find the
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 reduced amount = 25% of balanced stock amount that can be claimed under the policy.
25 Solution:
=  2,25,000 = ` 56,250
100 Given, total number of articles = 30,000,
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 total loss = burnt stock + reduced amount cost of the articles = ` 200 per dozen
= 1,50,000 + 56,250 = ` 2,06,250 200
Policy value i.e. one article costs ` ,
Since, claim =  Total loss 12
Property value policy value = ` 1.20 lakh
2, 25,000 Now, cost of 30,000 articles (property value)
=  2,06,250
3,75,000 = number of articles  cost of one article
 claim = ` 1,23,750 200
= 30000 
 sum of ` 1,23,750 can be claimed under the 12
policy. = ` 5,00,000
49
 Std. XII : Commerce (Maths - II)
Given, 20% of the articles were completely burnt, 9. A person takes out three policies with
 value of burnt article = 20% of value of the different insurance companies on an estate
total articles valued at ` 2,00,000. The amounts insured
20 with each company are as follows:
=  5,00,000
100 Company Amount insured
= ` 1,00,000 A ` 80,000

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and value of 3600 articles B ` 50,000
= number of article  cost of one article C ` 70,000
200 Find the amount recoverable from each

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= 3600  = ` 60,000 company in the event of loss to the extent of
12
These, 3600 articles were damaged to 80% of their ` 4,500.
value. Solution:

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 loss on 3600 articles = 80% of value of 3600 Given, property value of the estate = ` 2,00,000,
article loss = ` 4,500, policy value of company A = ` 80,000,
80 policy value of company B = ` 50,000 and
=  60,000 policy value of company C = ` 70,000.
100
Policy value
= ` 48,000 Since, claim =  Loss
 total loss = value of burnt article + loss on Property value

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3600 articles 80,000
 claim for company A =  4,500
= 1,00,000 + 48,000 = ` 1,48,000 2,00,000
Policy value = ` 1,800
Since, claim =
Property value
1, 20,000
=
5,00,000
 total loss

 1,48,000 = ` 35,520
O claim for company B =
50,000
2,00,000
= ` 1,125
 4,500
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 amount that can be claimed under the policy is 70,000
and claim for company C =  4,500
` 35,520. 2,00,000
= ` 1,575
8. For what amount should a cargo worth  amount recoverable from companies A, B and
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` 87,525 be insured so that in the event of C are ` 1,800, ` 1,125 and ` 1,575 respectively.
total loss, its value as well as the cost of
insurance may be recovered, the rate of 10. A car valued at ` 4,00,000 is insured for
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premium being ` 2 percent and other ` 2,50,000. The rate of premium is 5% less
expenses 75 paise percent. 20%. How much loss does the owner bear
Solution: including the premium, if value of the car is
Given, property value of cargo = ` 87,525, reduced to 60% of its original value. [Mar 16]
rate of premium = ` 2 percent, Solution:
other expenses = 75 paise percent = ` 0.75 percent Given, value of the car (property value) = ` 4,00,000,
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Let the amount of insurance (policy value) be ` 100, policy value = ` 2,50,000
which includes the premium of ` 2 and other Since, rate of premium is 5% less 20%,
expenses = ` 0.75 i.e., 5% – 20% of 5 = 5% – 1% = 4%
 the value of cargo (property value)  amount of premium = 4% of policy value
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= policy value – (premium + other expenses) 4

=  2,50,000 = ` 10,000
= 100 – (2 + 0.75) = 100 – 2.75 = ` 97.25 100
Now, for the property value of ` 97.25, the policy Now, value of the car is reduced to 60% of its
value is ` 100 original value.
 for property value of ` 87,525  reduced value of the car = 60% of original
87,525  100 value of car
the policy value = = ` 90,000 60
97.25 =  4,00,000
 A cargo worth ` 87,525 should be insured for 100
` 90,000. = ` 2,40,000
50
 Chapter 03: Insurance and Annuity
 loss = original value of car – reduced value  amount of premium = 0.64% of total policy value
of car 0.64
= 4,00,000 – 2,40,000 =  1,00,000 = ` 640
100
= ` 1,60,000 and, commission of agent = 12% of amount of premium
Policy value 12
Since, claim =  Loss =  640 = ` 76.80
Pr operty value 100

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2,50,000  agent’s commission is ` 76.80.
 claim =  1,60,000
4,00,000

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= ` 1,00,000 12. The rate of premium on a policy of ` 50,000
 the loss beared by the owner is ` 56 per thousand per annum. A rebate of
= loss – claim + premium 75 paise per thousand is allowed when the
premiums are paid annually. Find the net

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= 1,60,000 – 1,00,000 + 10,000 = ` 70,000
amount of premium payable if the policy
 loss beared by the owner is ` 70,000.
holder pays annually.
11. Stocks in a shop and godown costing Solution:
` 50,000 and ` 1,00,000 respectively were Given, policy value = ` 50,000,
insured through an agent who was paid rate of premium = ` 56 per thousand per annum,
12% of the total premium. If the former rebate = 75 paise per thousand = ` 0.75 per thousand

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was insured for 80% and the latter for 60%  net rate of premium = rate of premium – rebate
of the value, find the agent’s commission, = 56 – 0.75
when the rate of premium was 80 paise = ` 55.25 per thousand
percent less 20%.
Solution:
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Given, value of stock (property value) in the shop
= ` 50,000,
Let the policy value be ` 1,000.
Then the premium = ` 55.25
 for policy value of ` 50,000,
55.25  50,000
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value of stock (property value) in the godown net amount of premium =
1,000
= ` 1,00,000,
= ` 2762.50
rate of commission = 12%
Since, the stock in the shop was insured for 80% of  net amount of premium that policy holder
pays annually is ` 2762.50.
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its value.
 policy value of stock in the shop
= 80% of its property value 13. A warehouse valued at ` 10,000 contained
goods worth ` 60,000. The warehouse was
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80
=  50,000 insured against fire for ` 4,000 and the
100 goods to the extent of 90% of their value. A
= ` 40,000 fire broke out and goods worth ` 20,000
Also, the stock in the godown was insured for 60% were completely destroyed. While the
of its value. remainder was damaged and reduced to
 policy value of stock in the godown 80% of its value. The damage to the
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= 60% of its property value warehouse was to the extent of ` 2,000. Find
60 the total amount that can be claimed.
=  1,00,000
100 [Mar 15]
= ` 60,000 Solution:
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policy value policy value Given, property value of warehouse = ` 10,000,

Total policy = property value of goods = ` 60,000,
of stock in + of stock in
value policy value of warehouse = ` 4,000
the shop the godown
= 40,000 + 60,000 Now, goods were insured to 90% of their value
= ` 1,00,000  policy value of goods = 90% of property value
Now, rate of premium is 80 paise percent less 20%. of goods
i.e., 80 paise – 20% of 80 paise = 80 paise – 16 paise 90
=  60,000
= 64 paise percent 100
= ` 0.64 percent = ` 54,000
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 Chapter 03: Insurance and Annuity
Syllabus:
3.1 Fire, Marine and Accident Insurance
3.1 Fire, Marine and Accident Insurance,
1. Fire Insurance:
3.2 Annuity: Various Terminologies of Annuity, In this type of insurance, property like
Annuity Due, Sinking Fund buildings, godowns containing goods,
factories, etc. can be insured against loss due

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Introduction to fire.
Insurance is nothing but creation of some security or Property Value:
monetary protection against any possible loss or The value of entire property is called Property

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damage to the life or property of a person. Value.
Policy Value:
It offers protection against contingencies such as The value of the property insured is called

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fire, earthquake, flood, burglary, etc., which cause Policy Value.
loss to the life of a person, property, vehicles, etc. Premium:
Insurance is a legal document of the agreement or The amount paid to the insurance company to
contract between the insurance company (insurer) get the property insured is called Premium.
and the person who insures (insured). The period for the fire insurance policy is one

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year and the premium rates are expressed as
There are two types of insurance:
percentage of the value of the property insured.
1. Life Insurance: The value of damage is called “loss” and the
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Under this insurance, a person pays a certain amount which the insured can demand under
instalment of money (premium) periodically the policy is called “claim”.
to the life insurance company so as to get Claim Policy value
 =
insured for his life. The period may be of a loss Property value
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month, a quarter, a year, etc.
Policy value
 Claim =  Loss
In this policy, the insured gets a guarantee Property value
from the insurance company to receive a
definite sum of money after he has attained a 2. Accident Insurance:
E

certain age or maturity or on his death. This Under such insurance, a person can insure his
amount is called Policy Value. cars, trucks, two wheelers, etc. against damage
caused due to accidents or unforseen
PL

2. General Insurance: calamities. The policy also has the liability of

All types of insurance except the life the insured person to third parties involved in
insurance are covered by general insurance. the accident. The period of such policies is
Under general insurance, a person can insure one year.
his property like buildings, factories, godowns 3. Marine Insurance:
containing goods against loss due to fire, This type of insurance covers the risk of
M

earthquake, flood etc. damage in the transport of goods by sea. The

Vehicles can also be insured against damage premium of the policy depends upon the value
due to accidents. of the ship and its cargo. The period of the
policy is same as the period of the journey.
SA

Here, the insurance company guarantees to The claims are calculated by the same method
pay compensation in proportion that exists as that of fire insurance.
between the policy value and property value in Note:
case of loss or damage. 1. Policy value is calculated on property value at
given percentage.
The insurer undertakes to pay only the actual 2. Premium is calculated on policy (insured)
amount of loss suffered by the insured. value.i.e.,
Note: The insured person cannot make profit Amount of Rateof premium
=  policy value
out of insurance. premium 100
47
 Chapter 03: Insurance and Annuity
Types of Annuities: Amount or Future value or Accumulated Value
of an Annuity:
Annuities are classified according to how long the The accumulated value or the amount of annuity
sequence of payments continues. certain is the sum total of all the accumulated values
1. Annuity Certain: of each payment calculated at the end of last period
If the total number of time periods for which of the annuity at a given rate of compound interest.
the annuity payments are made, is fixed in

T
Note:
advance, the annuity is called an annuity 1. Only uniform and certain annuities will get
certain. consider.

N
e.g., The hire-purchase transactions, bank
2. If type of annuity is not mentioned in the
recurring deposits, etc.
problem, then always assume that annuity is
2. Annuity Contingent: immediate.

TE
An annuity contingent is one whose payments 3. If it is not mentioned about type of interest in
are made till the happening of an event such as the problem, then always consider interest rate
death of a person, the marriage of a girl, etc. is compounded per annum.
e.g., Life Insurance premium is paid annually
and stops when insured person dies. Formulae required for an immediate Annuity:

3. Perpetual annuity or Perpetuity: Accumulated value ‘A’ of an immediate annuity of n

N
It is an annuity whose payments continue payment each of ` C at compound rate of interest r%
forever. The beginning date of the perpetual per each time period is given
annuity is known but the terminal date is not C r
A = [(1 + i)n – 1], where i =
known.
e.g., Life time pension policy in which the
O
policy holder pays premium for a fixed period,
but continues to get pension for his whole life.
i

given by
C
100
Also, present value ‘P’ of the immediate annuity is

P = [1 – (1 + i)–n]
C
i
Classes of Annuity Certain:
Relation between accumulated annuity A and
Annuity certain is classified on the basis of payment, present value ‘P’ is
interval and time of payment. These are of three A = P(1 + i)n
E

types. 1 1 i
Also, – =
1. Annuity Immediate or Ordinary Annuity: P A C
If the payments fall due at the end of each Formulae required for an Annuity Due:
PL

period, the series is called annuity

immediate. i.e., first payment falls due at the Let C be the sum which is paid at the beginning of
end of first interval. each time period, for n time periods.
Let rate of interest be r% per time period with
2. Annuity Due: r
If the payments fall due at the beginning of i=
100
M

each period, the series is called annuity due. Let A' be the accumulated value.
i.e., the first payment falls due at the and P' be the present value.
beginning of the first interval. Accumulated value A' is given by
3. Deferred or Reversionary Annuity: C 1  i 
SA

If the money is allowed to accumulate for a A'  [(1 + i)n – 1]

i
certain period and the payments begin after Present value P' is given by
the lapse of that period, the series is called
C 1  i 
deferred or reversionary annuity. P'  [1 – (1 + i)–n]
i
Present value of an annuity: Relation between A' and P' is
The present value of a given annuity is the sum of A '  P ' (1 + i)n
the present values of its different instalments i.e., the 1 1 i
total worth of all the payments of annuity under Also, – =
P ' A ' C 1  i 
consideration, at the beginning of the annuity.
53
 Std. XII : Commerce (Maths - II)
Note: = 20000 (1.4641 – 1)
For annuity due, we can use the formulae for annuity = 20000  0.4641
immediate (or ordinary annuity), only replacing C by A = ` 9282
C(1 + i).  amount accumulated at the end of 4 years is
Sinking Fund: ` 9282.
3. Find the amount accumulated after 2 years

T
A sinking fund is a fund that is created to
accumulate a specific sum of money at some definite if sum of ` 12,000 is invested at the end of
date in future by paying regular and equal payments every 6 months at 12% p.a. compounded
half yearly. [Given (1.06)4 = 1.2625]

N
at compound interest.
Solution:
Usually an organisation (e.g., a company, a housing Given, C = ` 12,000, n = 2 years, r = 12% p.a.,
society, etc.) sets up a sinking fund to replace a Since, amount is invested at the end of every

TE
depreciating asset at a future date. 6 months.
 it is an immediate annuity
Exercise 3.2 Now, n = 2 years
1. Find the accumulated (future) value of  n = 2  2 = 4 half years,
annuity of ` 400 made annually for 3 years 12
and r = 12% p.a. = = 6% per half year,

N
at interest rate 8% compounded annually. 2
[Given that (1.08)3 = 1.2597] r 6
i=   0.06
Solution: 100 100
Given, C = ` 400, n = 3 years, r = 8% p.a., O C
r 8 Now, A = [(1 + i)n – 1]
i= = = 0.08 i
100 100 12, 000
C = [(1 + 0.06)4  1]
Since, A = [(1 + i)n – 1] 0.06
C
i = 2,00,000 [(1.06)4 – 1]
400 = 2,00,000 (1.2625 – 1)
 A= [(1 + 0.08)3 – 1]
0.08 = 2,00,000 (0.2625)
= 5000 [(1.08)3 – 1]  A = ` 52,500
E

= 5000 (1.2597 – 1) = 5000  0.2597  amount accumulated after 2 years is ` 52,500.

 A = ` 1298.50
 accumulated (future) value of annuity is 4. Find the accumulated value after 1 year of
an annuity immediate in which ` 20,000 are
PL

` 1298.50.
invested every quarter, at 16% p.a.
compounded quarterly.
2. Mr. Godbole invested ` 2,000 at the end of
each year in a finance company that offered [Given (1.04)4 = 1.1699] [July 17]
him interest compounded at 10% p.a. What Solution:
is the amount accumulated at the end of 4 Given, C = ` 20,000, n = 1 year = 4 quarter,
M

years. [Given (1.1)4 = 1.4641] 16

r = 16% p.a. = % = 4% per quarter,
Solution: 4
Given, C = ` 2,000, r = 10% p.a., n = 4 years, r 4
i= = = 0.04
r 10 100 100
SA

i= = = 0.1
100 100 C
Since, A = [(1 + i)n – 1]
Since, Mr. Godbole invested amount at the end of i
each year. 20,000
 it is an immediate annuity = [(1 + 0.04)4 – 1]
0.04
C = 5,00,000 [(1.04)4 – 1]
Now, A = [(1 + i)n – 1]
i = 5,00,000 (1.1699 – 1)
2000 = 5,00,000 (0.1699)
= [(1 + 0.1)4 – 1]
0.1  A = ` 84,950
= 20000 [(1.1)4 – 1]  accumulated value after 1 year is ` 84,950.
54
 Chapter 03: Insurance and Annuity
5. Find the present value of an annuity C
Since, A = [(1 + i)n – 1]
immediate of ` 18,000 p.a. for 3 year at 9% i
p.a. compounded annually. C
[Given (1.09)–3 = 0.7722] [Mar 14, 17]  4,00,000 = [(1 + 0.1)4 – 1]
0.1
Solution:  4,00,000  0.1 = C [(1.1)4 – 1]
Given, C = ` 18,000, n = 3 years, r = 9% p.a.,
 40,000 = C (1.4641 – 1)

T
r 9
 i= = = 0.09  40,000 = C  0.4641
100 100
40, 000
C  C=

N
Since, P = [1 – (1 + i)–n] 0.4641
i
 C = ` 86,188.3215
18, 000
 P= [1 – (1 + 0.09)–3]  Mrs. Menon should invest ` 86,188.3215 at
0.09

TE
the end of each year.
= 2,00,000 [1 – (1.09)–3]
= 2,00,000 (1 – 0.7722)
8. Mr. Chitale wishes to create a fund of
= 2,00,000  0.2278 ` 5 lakhs after 4 years when he retires. He
 P = ` 45,560 decides to set aside a sum of money at the
 present value of the annuity immediate is end of each coming year for the same,

N
` 45,560. investing it in a bank giving him 10% p.a.
compounded annually. What sum should be
6. Find the present value of an ordinary kept aside each year?

at 14% p.a. compounded annually.

[Given (1.14)4 = 0.5921]
Solution:
O
annuity of ` 42,000 per annum for 4 years Solution:
Given, A = ` 5 lakhs, n = 4 years, r = 10% p.a.
 i=
r
=
100 100
10
= 0.1
C
Given, C = ` 42,000, n = 4 years, r = 14% p.a., C
Since, A = [(1 + i)n – 1]
r 14 i
 i= = = 0.14
100 100 C
 5,00,000 = [(1 + 0.1)4 – 1]
C 0.1
Since, P = [1 – (1 + i)–n]
E

i  5,00,000  0.1 = C [(1.1)4 – 1]

42, 000  5,00,000  0.1 = C(1.4641 – 1)
 P= [1 – (1 + 0.14)–4]
0.14  50,000 = C  0.4641
PL

= 3,00,000 [1 – (1.14)–4] 50, 000

 C=
= 3,00,000 (1 – 0.5921) 0.4641
= 3,00,000  0.4079  C = ` 1,07,735.40
 P = ` 1,22,370  Sum of ` 1,07,735.40 should be kept aside
 present value of the ordinary annuity is each year.
M

` 1,22,370.
9. Find the rate of interest compounded per
7. Mrs. Menon plans to save for her annum if an annuity immediate at ` 10,000
daughter’s marriage. She wants to per year amounts to ` 1,30,000 in 3 years.
SA

accumulate a sum of ` 4,00,000 at the end Solution:

of 4 years. How much should she invest at Given, C = ` 10,000, A = ` 1,30,000, n = 3 years
the end of each year from now, if she can C
get interest compounded at 10% p.a.? Since, A = [(1 + i)n – 1]
i
[Given (1.1)4 = 1.4641] [Mar 16; Oct 15]
10, 000
Solution:  1,30,000 = [(1 + i)3 – 1]
Given, A = ` 4,00,000, n = 4 years, r = 10% p.a., i
r 10 1,30,000 1
 i= = = 0.1  = (1 + 3i + 3i2 + i3 – 1)
100 100 10,000 i

55
 Std. XII : Commerce (Maths - II)

3i  3i 2  i3 C 1  i 
 13 = Since, A' = [(1 + i)n – 1]
i i
i  3  3i  i 2  500 1  0.1
 13 =  A' = [(1 + 0.1)3 – 1]
i 0.1
 13 = 3 + 3i + i2 500  1.1
[(1.1)3 – 1]

T
 i2 + 3i + 3 – 13 = 0 =
0.1
 i2 + 3i – 10 = 0
550
 i2 + 5i – 2i – 10 = 0 = (1.331 – 1)

N
0.1
 i(i + 5) – 2(i + 5) = 0
= 5,500 (0.331)
 (i + 5) (i – 2) = 0
 i + 5 = 0 or i – 2 = 0  A' = ` 1820.50

TE
 i = –5 or i = 2  accumulated value of annuity due is ` 1820.50
But i is never negative
 i=2 12. A person plans to put ` 200 at the
r beginning of each year for 2 years in a
 =2
100 deposit giving 2% p.a. compounded

N
 r = 200% p.a. annually. What will be the accumulated
 rate of interest is 200 % p.a. amount after 2 years?
Solution:
10. Find the number of years for which an O
annuity of ` 200 is paid at the end of each
year, if its accumulated amount works out
to be ` 662 with interest compounded at
Given, C = ` 200, n = 2 years, r = 2% p.a.
 i=
r
=
100 100
2
= 0.02
C
10% p.a.? C 1  i 
Solution: A'  [(1 + i)n – 1]
i
Given, C = ` 200, A = ` 662, r = 10% p.a.
r 10 200 1  0.02 
 i= = = 0.1  A'  [(1 + 0.02)2 – 1]
E

100 100 0.02

C
Since, A = [(1 + i)n – 1] 200  1.02
= [(1.02)2 – 1]
i 0.02
PL

200 204
 662 = [(1 + 0.1)n – 1] = (1.0404 – 1)
0.1 0.02
662  0.1
 = (1.1)n – 1 = 10200  0.0404
200
 0.331 = (1.1)n – 1  A' = ` 412.08

M

 0.331 + 1 = (1.1)n  1.331 = (1.1)n accumulated amount after 2 years is ` 412.08.

3 n
 (1.1) = (1.1)
 n = 3 years 13. Find the present value of an annuity due of
 The annuity is paid for 3 years. ` 400 to be paid per quarter, at 32% p.a.
SA

compounded quarterly for 1 year.

11. Find the accumulated value of annuity due Solution:
of ` 500 p.a. for 3 years at 10% p.a. Given, C = ` 400, n = 1 year = 4 quarter,
compounded annually.
[Given (1.1)3 = 1.331] 32
r = 32% p.a. = % per quarter
Solution: 4
Given, C = ` 500, n = 3 years, r = 10% p.a., = 8% per quarter
r 10 r 8
 i= = = 0.1  i= = = 0.08
100 100 100 100
56
 Chapter 03: Insurance and Annuity

C 1  i  16. A person sets up a sinking fund in order to

Since, P '  [1 – (1 + i)–n] have ` 10 lakh after 10 years for his
i
children’s education. How much amount
400 1  0.08  should be set aside bi-annually into an
 P'  [1 – (1 + 0.08)–4]
0.08 account paying 5% p.a. compounded semi
400  1.08 annually?
= [1 – (1.08)–4]

T
0.08 [Given (1 + 0.025)20 = 1.6386]
432 Solution:
= (1 – 0.7350) Given, A = 10 lakh, n = 10 years, r = 5% p.a.,
0.08

N
= 5400  0.265 = ` 1431 Since, the amount gets compounded semi annually.
 present value of an annuity due is ` 1431.  It is an immediate annuity
Here, n = 10 years = 10  2

TE
= 20 semi (half) years
14. An annuity immediate is to be paid for
certain number of years, at 12% p.a. It’s 5
r = 5% p.a. = % per half year
present value is ` 5,000 and the 2
accumulated value is ` 10,000. Find the = 2.5 % per half year
amount of each annuity payment? r 2.5
 i= = = 0.025
Solution: 100 100

N
Given, P = ` 5,000, r = 12% p.a., A = ` 10,000 C
Since, A = [(1 + i)n – 1]
r 12 i
 i= = = 0.12
100 100 C
O 10,00,000 = [(1 + 0.025)20 – 1]
1 1 i 0.025
Since, – =
P A C  10,00,000  0.025 = C[(1.6386 – 1)]
1 1 0.12  25,000 = C  0.6386
 – =
C
5,000 10,000 C 25, 000
 C=
2 1 0.12 0.6386
 – =  C = ` 39148.14
5000  2 10,000 C
 amount of ` 39148.14 should be set aside
2  1 0.12 bi-annually into the account.
 =
E

10,000 C
1 0.12 Miscellaneous Exercise – 3
 =
10,000 C
PL

1. A house valued at ` 3,00,000 is insured at

 C = 0.12  10,000 75% of its value. If rate of premium is 80
 C = ` 1,200 paise percent, find the premium paid by the
 the amount of each annuity payment is ` 1,200. owner of the house. If an agent gets
commission at 9% of the premium, find
15. For an annuity immediate paid for 3 years agent’s commission.
M

with interest compounded at 10% p.a., the Solution:

present value is ` 12,000. What is its Given, property value = ` 3,00,000
accumulated value after 3 years? Since, the house is insured for 75% of it’s value.
[Given (1.1)3 = 1.331]  policy value = 75% of property value
SA

Solution: 75
=  3,00,000
Given, P = ` 12,000, n = 3 years, r = 10% p.a., 100
r 10 = ` 2,25,000
 i= = = 0.1
100 100 Now, rate of premium = 80 paise percent
Since, A = P (1 + i)n = ` 0.8 percent
 A = 12,000 (1 + 0.1)3 = 12,000 (1.1)3  amount of premium = 0.8 % of policy value
= 12,000  1.331 .8
=  2,25,000
 A = ` 15,972 100
 accumulated value after 3 years is ` 15,972. = ` 1,800
57
 Std. XII : Commerce (Maths - II)
Also, agent’s rate of commission is 9% of the 3. A factory building is insured for 5/6th of its
premium. value at a premium of ` 2.50 percent. If at
 agent’s commission = 9% of premium 7.5% of the premium, the agent is paid a
9 commission of ` 2812.50, find value of the
=  1800 building.
100
= ` 162 Solution:

T
 premium paid by the owner of house is Let the property value of the factory building be ` x.
` 1,800 and the agent’s commission is ` 162. Since, the building is insured for 5/6th of its value.
th
5

N
 policy value =   of property value
2. A shopkeeper insures his shop and godown 6
valued at ` 2,50,000 and ` 5,00,000 for 80% 5 5x
and 50% of their values. If the rate of = x=`

TE
6 6
premium is 8%, calculate the total annual
Now, rate of premium is ` 2.50 percent
premium payable by him.
Solution:  amount of premium = 2.50% of policy value
Given, property value of the shop = ` 2,50,000, 2.50 5 x
= 
property value of the godown = ` 5,00,000 100 6
0.1 5 x 0.5 x

N
Since, shopkeeper insures shop for 80% and godown =  =`
for 50% of their values 4 6 24
 policy value of the shop = 80% of its property Also, agent’s commission is ` 2812.50 and his rate
value of commission is 7.5 % of premium.
=
80
100
= ` 2,00,000
O
 2,50,000
Since, agent’s commission = 7.5 % of premium
 2812.50 =
7.5 0.5 x
100

24
C
and 0.3 0.5 x
 2812.50 = 
policy value of the godown = 50% of its property 4 24
value 0.1 0.5 x
50
 2812.50 = 
=  5,00,000 4 8
E

100 0.05 x
= ` 2,50,000  2812.50 =
32
Now, rate of premium is 8% for the shop as well as 2812.50  32
PL

for the godown.  x=

0.05
 amount of premium for the shop
 x = 56250  32
= 8% of its policy value
 x = ` 18,00,000 = 18 lakh
8
=  2,00,000  property value of the factory building is
100
18 lakh.
M

= ` 16,000
and amount of premium for the godown
= 8% of its policy value 4. A merchant takes out fire insurance policy
to cover 80% of the book value of the stock.
8
=  2,50,000 A fire broke out and stock worth ` 80,000
SA

100 was completely destroyed while the rest was

= ` 20,000 damaged and reduced to 20% of the book
amount of amount of value. If he receives a sum of ` 67,200 as
total
 = premium for + premium for proportional compensation under the
premium
the shop the godown policy, find the book value of the stock.
= 16,000 + 20,000 Solution:
= ` 36,000 Let book (property) value of the stock be ` x.
 total premium payable by the shopkeeper is Since, merchant insures 80% of book value of the
` 36,000. stock.

58
 Chapter 03: Insurance and Annuity
 policy value = 80% of book value of the stock 5. A person aged 35 years takes a policy for
80 ` 1 lakh for a period of 20 years. The rate of
= x
100 premium is ` 76 and the average bonus rate
4x is ` 7 per thousand per annum. If he dies
=` after paying 10 annual premiums, what will
5
his nominee get?

T
Now, stock worth ` 80,000 were completely
destroyed. Solution:
 remaining book value of the stock Given, policy value = ` 1 lakh,

N
period of the policy = 20 years
= ` (x – 80,000)
Since, the rate of premium is ` 76 per thousand
But, this remaining stock was damaged and reduced
 amount of premium (per year)

TE
to 20% of the book value.
76
 reduced value of the remaining stock =  1,00,000 = ` 7,600
1000
= 20% of `(x – 80,000)
But, the person dies after paying 10 annual
20
=  (x – 80,000) premiums.
100
 amount of premium paid by the person

N
 x  80,000 
=`   = 7,600  10
 5  = ` 76,000
value of completely reduced value Also, rate of bonus is ` 7 per thousand per annum
 total loss =
destroyed stock

= 80,000 +
+

x  80, 000
O
of the stock
 bonus (per year) =
7
1000
 1,00,000 = ` 700

5  bonus for 10 years = 700  10 = ` 7000

C
4, 00, 000  x  80, 000 The person dies after paying 10 annual premiums.
=
5  amount received by his nominee
 3, 20,000  x  = policy value + bonus
= ` 
E

 5  = 1,00,000 + 7,000
Now, the merchant receives ` 67,200 as proportional = ` 1,07,000
compensation.  amount received by his nominee is ` 1,07,000.
PL

 claim = ` 67,200 6. 15,000 articles costing ` 200 per dozen were

Policy value insured against fire for ` 1 lakh. If 20% of
Since, claim =  Loss
Property value the articles were completely burnt, another
4x 2400 articles were damaged to the extent of
M

 3, 20,000  x  80% of their value, find the amount that

 67,200 = 5   
x  5  can be claimed under the policy.
Solution:
4  3, 20,000  x 
 67,200 =   Given, total number of articles = 15,000,
SA

5  5 
cost of articles = ` 200 per dozen
67, 200  5  5
 = 3,20,000 + x 200
4  cost of one article = ` ,
12
 16,800  25 = 3,20,000 + x policy value = ` 1 lakh
 4,20,000 = 3,20,000 + x cost of 15,000 articles (property value)
 x = 4,20,000 – 3,20,000 = cost of one article  number of articles
 x = ` 1,00,000 200
=  15,000 = ` 2,50,000
 book value of the stock is ` 1,00,000. 12
59
 Std. XII : Commerce (Maths - II)
Value of goods completely destroyed = ` 20,000 But, the person pays premium for 10 years.
 Value of remaining goods  Premium paid by the person = 4,000  10
= Property value of goods – Value of goods = ` 40,000
destroyed Since, rate of bonus = ` 20 per year per thousand
= 60,000 – 20,000 = ` 40,000 20
Since, value of remaining goods is reduced to 80%  bonus for 1 year =  80,000
1000

T
of it’s value. = ` 1,600
 reduced value of remaining goods  bonus for 10 years = 1,600  10
= 80% of value of remaining goods

N
= ` 16,000
80
=  40,000 = ` 32,000  Paid up value of the policy
100 = Premium paid by the person + Bonus for 10
 loss on reduced value of goods years

TE
= value of remaining goods – reduced value of = 40,000 + 16,000
goods = ` 56,000
= 40,000 – 32,000 = ` 8,000  Paid up value of the policy is ` 56,000 if the
value of goods person discontinues paying the premium after
total loss loss on reduced
 = completely + 10 years.
on goods value of goods
destroyed

N
= 20,000 + 8,000 = ` 28,000 3.2 Annuity
amount claimed Policy value of goods loss on Definition:
= 
on goods Property value of goods goods An annuity is a sequence of equal payments made at
54,000
=
60,000
 28,000 = ` 25,200
O regular intervals of time, with compound interest on
the payment.
These intervals may be a year, a half year, a month,
C
Now, loss on warehouse = ` 2,000 etc.
amount claimed Policy value of warehouse
 = For example:
on warehouse Property value of warehouse
Insurance premium paid either monthly, quarterly,
 loss on warehouse semi annually or annually, School fees paid every
4,000
E

=  2,000 = ` 800 month, Vehicle loan, etc.

10,000
Various Terminologies of Annuity:
total amount amount claimed amount claimed
 = +
PL

claimed on goods on warehouse Payment Period:

= 25,200 + 800 = ` 26,000 The time between two successive payment dates of
 total amount that can be claimed is ` 26,000. an annuity is called its payment period or payment
interval.
14. A person takes a life policy for ` 80,000 for Term or duration:
a period of 20 years. He pays premium for
M

The total time from the beginning of the first

10 years during which bonus was declared payment period to the end of last payment period is
at the average rate of ` 20 per year per called the term or duration of an annuity.
thousand. Find the paid up value of the 1. Annuitant:
SA

policy, if he discontinues paying the The person who receives the annuity is called
premium after 10 years. annuitant.
Solution:
Given, policy value = ` 80,000, 2. Instalment:
The payment of each single annuity is called
period of policy = 20 years
an instalment.
Policy value
 Premium per year = 3. Cessation Period:
Period of policy
The time that intervenes between the payment
80,000 of two successive instalments of an annuity is
= = ` 4,000
20 called its cessation period.
52
 Chapter 03: Insurance and Annuity

3
th 5
Since, bedsheets were insured to   of their value. Now, for the rate of premium = %
8
7
5
3
th
amount of premium = % of policy value
 policy value =   of property value 8
7 5 1
3 14, 40, 000 =   5,60,000
=  4,80,000 = ` 8 100

T
7 7 = ` 3,500
Let the cost of bedsheets that were damaged be ` x. 5
Since, the value of damaged bedsheets is reduced to and for the rate of premium = % less 20%

N
8
40% of their value.
 loss on damaged bedsheets = 40% of their 5 5
=  – 20% of 
value 8 8

TE
40  5 20 5 
= x = –  
100  8 100 8 
2x
=`  5 1 4 1
5 =  – = %= %
 8 8  8 2
Now, amount recovered against damage = ` 24,000
 claim = ` 24,000 1

N
amount of premium = % of policy value
Policy value 2
Since, Claim =  Loss 1 1
Property value =   5,60,000
2 100

 24,000 =
14, 40, 000
7
4,80,000
144  2  x

2x
5
O 
= ` 2,800
saving made in the premium
5
= premium on % – premium on %
1
C
 24,000 = 8 2
48  5  7
= 3,500 – 2,800
24, 000  48  5  7
 x= = ` 700
144  2
 saving made in the premium by the insured is
 x = ` 1,40,000 ` 700.
E

 cost value of the damaged bedsheets is Now, the property is damaged to the extent of 40%
` 1,40,000. of its value.
 number of damaged bedsheets  value of damaged property (loss)
PL

cost of damaged bedsheets = 40% of property value

=
cost of 1bedsheet 40
=  7,00,000
1, 40, 000 100
= = 875
160 = ` 2,80,000
 the number of damaged bedsheets are 875. Policy value
 Loss
M

Since, claim =
10. A property valued at ` 7 lakh is insured to Property value
5 5,60,000
the extent of ` 5,60,000 at % less 20%. =  2,80,000
8 7,00,000
SA

Calculate the saving made in the premium

 claim = ` 2,24,000
by the insured. How much loss does the
owner bear including premium if the  loss beared by the owner including premium
property is damaged to the extent of 40% of 1
= (loss – claim) + premium on %
its value. 2
Solution: = (2,80,000 – 2,24,000) + 2,800
Given, property value = ` 7 lakh, = 56,000 + 2,800
policy value = ` 5,60,000, = ` 58,800
5  loss beared by the owner including the
rate of premium = % less 20%.
8 premium is ` 58,800.

61
 Std. XII : Commerce (Maths - II)
11. Stocks in a shop and godown costing and 20% of the stock was destroyed by fire in
` 25,000 and ` 50,000 respectively were the godown
insured through an agent who was paid  destroyed value of the stock (loss) in godown
15% of the total premium. If the former = 20% of its stock value
was insured for 80% and the later for 60% 20
of the value, find the agent’s commission, =  50,000 = ` 10,000
100

T
when the rate of premium was 80 paise  claim for the godown
percent less 20%. If the entire stock in the
Policy value of stock in the godown
shop and 20% of that in the godown was =
Property value of stock in the godown

N
destroyed by fire, what sum can be claimed
under the policy?  loss on godown
Solution: 30000
=  10000 = ` 6,000
Given, stock (property) value of the shop = ` 25,000

TE
50000
and stock (property) value of the godown = ` 50,000  total loss = claim for the shop + claim for the
Since, the former was insured to 80% of its stock godown
value. = 20,000 + 6,000 = ` 26,000
 policy value of stock in the shop  agent’s commission is ` 48 and sum of
= 80% of its stock value ` 26,000 can be claimed under the policy.
80

N
=  25,000 = ` 20,000 12. A person holding a life policy of ` 60,000
100
Also, he insured 60% of stock value of the godown for a term of 25 years wishes to discontinue
 policy value of stock in the godown after paying premium for 8 years at the
= 60% of its stock value
=
60
100
 50,000 = ` 30,000
O rate of ` 58 per thousand per annum. What
paid up value will he get on the policy?
What amount will he get if the surrender
value granted is 35% of the premiums paid
C
Total policy value
excluding the first years premium?
= policy value of stock in the shop
Solution:
+ policy value of stock in the godown
Given, policy value = ` 60,000,
= 20,000 + 30,000 = ` 50,000
period of policy = 25 years
Now, rate of premium was 80 paise percent less 20%
E

i.e., 80 paise – 20% of 80 paise Policy value 60,000

 Premium per year = =
= 80 paise – 16 paise = 64 paise percent Period of policy 25
= ` 0.64 percent = ` 2,400
PL

 amount of premium = 0.64 % of total policy But, the person discontinued after paying premium
value for 8 years.
=
0.64
 50,000 = ` 320  premium paid by the person = 2,400  8
100 = ` 19,200
and agent’s rate of commission is 15% of total i.e., paid up value of the policy is ` 19,200
premium
M

Now, amount of premium paid for one year

 agent’s commission = 15% of total premium 58
15 =  60,000 = ` 3,480
=  320 = ` 48 1000
100  amount of premium paid for 8 years
SA

Now, entire stock in the shop was destroyed by fire. = 3,480  8 = ` 27,840
 loss occured on the shop = stock value of the Also, surrender value = 35% of (Premium paid for
shop 8 years – premium paid for
 loss occured on the shop = ` 25,000 first year)
 claim for shop 35
Policy value of stock in the shop =  (27,840 – 3,480)
=  loss on shop 100
Property value of stock in the shop 35
20000 =  24,360 = ` 8,526
=  25000 = ` 20,000 100
25000  Person will get amount of ` 8,526.
62
 Chapter 03: Insurance and Annuity
13. A godown valued at ` 40,000 contained Since, loss on godown = ` 20,000
stock worth ` 2,40,000. They were insured  amount claim for godown
against fire, the former to the extent of Policy value of the godown
` 25,000 and later for 80% of its value. Fire =  loss on godown
Property value of the godown
broke out and stock worth ` 30,000 was
completely destroyed while the rest was 25,000
=  20,000

T
reduced to 60% of its value. The damage to 40,000
the godown amounted to ` 20,000. What = ` 12,500
sum can be claimed under the policy.  total amount claimed

N
Solution: = amount claimed on stock + amount claimed
Given, property value of the godown = ` 40,000, on godown
Property value of the stock = ` 2,40,000 = 91,200 + 12,500

TE
Policy value of the godown = ` 25,000 = ` 1,03,700
Now, stock is insured for 80% of its value
 sum of ` 1,03,700 can be claimed under the
 policy value of the stock = 80% of its property policy.
value
80
=  2,40,000 14. Find the amount of an ordinary annuity if
100

N
payment of ` 500 is made at the end of
= 1,92,000 every quarter for 5 years at the rate of 12%
Also, value of stock completely destroyed = ` 30,000 per year compounded quarterly.
 value of remaining stock O Solution:
= property value of the stock – value of stock Given, C = ` 500, n = 5 years, r = 12% per year
destroyed Since, the amount is invested at the end of every
= 2,40,000 – 30,000 quarter.
C
= ` 2,10,000  It is an immediate annuity.
Also, value of remaining the stock is reduced to 60% Now, r = 12% per year
if it’s value. 12
= % per quarter = 3% per quarter
 reduced value of remaining stock 4
E

= 60% of its value r 3

 i= = = 0.03.
60 100 100
=  2,10,000
100 and n = 5 years
PL

= ` 1,26,000  n = 5  4 = 20 quarter years

 loss on reduced value of stock C
Since, A = [(1 + i)n – 1]
= value of remaining stock – reduced value of i
Stock 500
= 2,10,000 – 1,26,000 = [(1 + 0.03)20 – 1]
0.03
M

= ` 84,000 500
 total loss on the stock = [(1.03)20 – 1]
0.03
= value of stock completely destroyed 500
+ loss on reduced value of stock = (1.8061 – 1)
SA

0.03
= 30,000 + 84,000
500
= ` 1,14,000 =  (0.8061)
0.03
 amount claim for stock
403.05
Policy value of thestock =
=  Loss on stock 0.03
Pr operty value of thestock
40305
=
1,92,000 3
=  1,14,000
2, 40,000 = ` 13,435
= ` 91,200  amount of ordinary annuity is ` 13,435.
63
 Std. XII : Commerce (Maths - II)
15. How much should a company set aside at 17. Find the rate of interest compounded per
the end of each year if it has to buy a annum if an ordinary annuity of ` 10,000
machine expected to cost ` 1,00,000 at the per year amount to ` 20,500 in 2 years.
end of 4 years and interest rate is 5% p.a.
Solution:
compounded annually.
Given, C = ` 10,000, A = ` 20,500, n = 2 years
Solution:

T
C
Given, A = ` 1,00,000, n = 4 years, r = 5% p.a. Since, A = [(1 + i)n – 1]
r 5 i
 i= = = 0.05 10, 000
100 100  20,500 = [(1 + i)2 – 1]

N
C i
Since, A = [(1 + i)n – 1]
i 20,500 1  2i  i 2  1
 =
C 10,000 i

TE
 1,00,000 = [(1 + 0.05)4 – 1]
0.05 i  2  i
 1,00,000  0.05 = C [(1.05)4 – 1]  2.05 =
i
 5,000 = C (1.21550625 – 1)
 2.05 = 2 + i
 5,000 = C  0.21550625
 i = 2.05 – 2
5000

N
 C=  i = 0.05
0.21550625
 C = ` 23201.18 r  r 
 = 0.05 ….  i =
 The company should set aside a sum of 100  100 

16.
` 23201.18 in order to buy the machine.
O
Find the least number of years for which an



r = 100  0.05
r = 5%
rate of interest compounded per annum is 5%.
C
annuity of ` 3,000 per annum must run in
order that its amount just exceeds ` 60,000 18. Find the present value of an annuity
at 10% compounded annually. immediate of ` 20,000 per annum for
Solution: 3 years at 10% p.a. compounded annually.
E

Given, C = ` 3,000, A = ` 60,000, r = 10% p.a. Solution:

r 10 Given, C = ` 20,000, n = 3 years, r = 10 % p.a.
 i= = = 0.1
100 100 r 10
PL

C  i= = = 0.1
Since, A = [(1 + i)n – 1] 100 100
i C
3, 000 Since, P = [1 – (1 + i)–n]
 60,000 = [(1 + 0.1)n – 1] i
0.1
20, 000
60,000  0.1  P= [1 – (1 + 0.1)–3]
 = (1.1)n – 1 0.1
M

3,000 = 2,00,000 [1 – (1.1)–3]

 2 = (1.1)n – 1  1   1 
 (1.1)n = 2 + 1 =2,00,000 1   =2,00,000 1  
 1.1 
3
 1.331 
SA

 (1.1)n = 3
Applying log on both sides, we get  1.331  1 
= 2,00,000  
log10 1.1 = log10 3
n
 1.331 
 n log10 1.1 = log10 3  0.331  66, 200
= 2,00,000   = 1.331
 n  0.0414 = 0.4771  1.331 
0.4771 4771 = ` 49,737.04
 n= = = 11.52  12 years
0.0414 414  present value of an annuity immediate is
 least number of years are 12. ` 49,737.04.
64
 Chapter 03: Insurance and Annuity
19. A person buys a television paying ` 20,000 Here, we have to find present value of annuity.
in cash and promising to pay ` 1,000 at the C(1  i)
end of every month for the next 2 years. If  P= [1 – (1 + i)–n]
i
money is worth 12% p.a. converted
monthly, what is the cash price of the 2160(1  0.2)
= [1 – (1 + 0.2)–3]
television? [Mar 18] 0.2

T
Solution: = 12960 [1 – (1.2)–3]
Person buys the television for ` 20,000 in cash.  1 
 first payment = ` 20,000 = 12960 1  
 1.2  

N
3
and remaining value of the television was paid
in monthly instalments of ` 1,000
 1   1.728  1 
 C = ` 1000, n = 2 years = 2  12 = 24 months, = 12960 1   = 12960  
 1.728   1.728 

TE
12
r = 12% p.a. = = 1% p.m. 12960  0.728 9434.88
12 = =
r 1 1.728 1.728
 i= = = 0.01
100 100 P = ` 5460
Since, the amount is paid at the end of every month The man has paid 3 equal instalments of


N
It is an immediate annuity. 2160 each.
Now, to find sum of all instalments we have to find  total paid value of instalments = 3  2160
present value.
= ` 6480
C



P = [1 – (1 + i)–n]

P=
i
1000
0.01
[1 – (1 + 0.01)–24]
O Now, Interest = total paid value of instalments

= 6480 – 5460
– present value
C
= 1,00,000 [1 – (1.01)–24] = ` 1020
 1 
= 1,00,000 1   21. A company decides to set aside a certain
 1.01 
24
sum at the end of each year to create a
E

 1  sinking fund, which should amount to

= 1,00,000 1  
 1.2697  ` 4 lakhs in 4 years at 10% p.a. Find the
= 1,00,000 (1 – 0.7876) amount to be set aside each year?
PL

= 1,00,000  0.2124 Solution:

 P = ` 21240 Given, A = 4 lakhs, n = 4 years, r = 10% p.a.
 Cash price of the television r 10
 i= = = 0.1
= first payment + present value 100 100
= 20,000 + 21240 C
M

= ` 41,240 Since, A = [(1 + i)n – 1]

i
 Cash price of the television is ` 41,240.
C
 4,00,000 = [(1 + 0.1)4 – 1]
0.1
20. A man borrowed some money and paid
SA

back in 3 equal instalments of ` 2160 each.  4,00,000  0.1 = C [(1.1)4 – 1]

What sum did he borrow if the rate of  40,000 = C (1.4641 – 1)
interest charged was 20% p.a. compounded  40,000 = C  0.4641
annually? Find also the total interest
40, 000
charged.  C=
Solution: 0.4641
Given, C = ` 2160, n = 3 years, r = 20% p.a.  C = ` 86188.3215
r 20  the amount to be set aside each year is
 i= = = 0.2
100 100 ` 86188.3215.
65
 Std. XII : Commerce (Maths - II)
22. Find the future value after 2 years if the 107360
 = (1.2)n – 1
sum of ` 6,000 is invested at the end of 100000
every half year at 12% p.a. compounded  1.0736 = (1.2)n – 1
half yearly.  (1.2)n = 1.0736 + 1
Solution:  (1.2)n = 2.0736
Given, C = ` 6,000, n = 2 years, r = 12% p.a.

T
 (1.2)n = (1.2)4 ….[ (1.2)4 = 2.0736]
Since, the amount invested is compounded half
yearly.  n = 4 years

N
 it is an Immediate annuity. 24. The machinery is expected to cost 25%
Now, n = 2 years more over its present cost of ` 6,96,000
 n = 2  2 = 4 half years after 20 years. The scrap value of the

TE
12
machinery will realize ` 1,50,000. What
and r = 12% p.a. = = 6% per half year sum should be set aside at the end of each
2 year at 5% p.a. compound interest for
r 6 20 years to replace the machinery?
i= = = 0.06
100 100 [Given (1.05)20 = 2.653]
C Solution:

N
Since,A = [(1 + i)n – 1]
i Since, the machinery is expected to cost 25% more over
6000 it’s present cost i.e., 6,96,000.
 A = [(1 + 0.06)4 – 1]
0.06  expected value of machinery

=
600000
6
[(1.06)4 – 1]

= 1,00,000 (1.26247696 – 1)
O = present cost + 25% of present cost
= 6,96,000 +
25
100
 6,96,000
C
= 1,00,000  0.26247696 = 6,96,000 + 1,74,000 = ` 8,70,000
A = ` 26247.696 Now, after 20 years scrap value of the machinery is
 future value after 2 years is ` 26,247.696. ` 1,50,000.
accumulated expected
E

scrap value
23. After how many years would an annuity  value of = value of –
of machinery
machinery machinery
due of ` 3,000 p.a. accumulated ` 19324.80
= 8,70,000 – 1,50,000
PL

at 20% p.a. compounded annually?

 A = ` 7,20,000
Solution:
Also, r = 5% p.a., n = 20 years, (1.05)20 = 2.653
Given, C = ` 3,000, A' = 19324.80, r = 20% p.a.
r 5
r 20  i= = = 0.05
 i= = = 0.2 100 100
100 100
C
M

C 1  i  Since, A = [(1 + i)n – 1]

Since, A' = [(1 + i)n – 1] i
i C
 7,20,000 = [(1 + 0.05)20 – 1]
3000 1  0.2  0.05
 [(1 + 0.2)n – 1]
SA

19324.80 =
0.2  7,20,000  0.05 = C [(1.05)20 – 1]
3000  1.2  36,000 = C (2.653 – 1)
 19324.80 = [(1.2)n – 1]
0.2  36,000 = C  1.653
 19324.80 = 3000  6 [(1.2)n – 1]  C=
36, 000
19324.80 1.653
 = (1.2)n – 1
3000  6  C = ` 21778.58
1932480  sum of ` 21778.58 should be set aside at the
 = (1.2)n – 1 end of each year.
18  100000
66
 Chapter 03: Insurance and Annuity
5. Mr. Kumar Nandu invested ` 40,000 at the
Additional Problems for Practice
end of each year in a financial institution that
Based on Exercise 3.1 offered him interest compounded at 8% p.a.
What is the amount accumulated at the end of
1. Find the premium on shop worth ` 5,40,000 at
4 years?
6% if
i. the shop is fully insured. 6. For an immediate annuity paid for 3 years

T
ii. the shop is insured to half of it’s value. with interest compounded at 10% p.a. its
present value is ` 10,000. What is its
2. A car is valued at ` 7,50,000 for 60% of its
accumulated value after 3 years.

N
value. If the rate of premium is 50 paise per
[Given: (1.1)3 = 1.331]. [July 16]
cent, find the premium paid. If an agent gets
commission of ` 180, find the agent’s rate of 7. Find the accumulated value of an annuity due
commission. of ` 5,000 per annum for 4 years at 8% p.a.

TE
th
[Given (1.08)4 = 1.3605]
 3
3. A toy shop worth ` 6,50,000 is for   of 8. Find the accumulated value after 3 years of an
 13 
immediate annuity of ` 2,000 p.a. with interest
its value. If rate of premium is of 6%, find
amount of premium. Also, find commission of compound at 10% p.a. [Given (1.1)3 = 1.331]
agent if the rate of commission is 5%. [July 18]

N
4. A bike worth ` 2,50,000 is insured for ` 90% Based on Miscellaneous Exercise – 3
of its value. In an accident it is damaged to the 1. A person insures his property for 65% of it’s

5.
extent of ` 70,000. Find the amount of
compensation that can be claimed under the
policy.
O
A person takes a life policy of ` 1,00,000 for
value. Rate of the premium is 9%. If the agent
gets commission of ` 6,552 at the rate of 8%,
find the
i. premium amount ii. policy value
C
20 years. The rate of premium is ` 45 per iii. property value
thousand per year. If average bonus paid 2. 200 chairs of price ` 250 each were insured
during the period is ` 8 per thousand, what is 4
th

the net benefit to the insured?   of their value. During the transit some
5
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6. Find the agent’s commission at 15% on the chairs were damaged and reduced to 50% of
first premium if he places insurance for the value. If the amount recovered against the
` 2,00,000 on the life of a person, the damaged was ` 15,000, find the number of
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premium being at the rate of ` 35 per chairs that were damaged.

thousand, per annum, paid annually. [Oct 14]
3. A person insured his shop worth ` 3,00,000
Based on Exercise 3.2 with three companies A, B and C for the
1. For an immediate annuity paid for 4 years amounts ` 50,000, ` 60,000 and ` 80,000
with interest compounded at 10%, the present respectively fire broke out and caused a loss of
` 1,50,000. Calculate the amounts that can be
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value is ` 20,000. What is it’s accumulated

value after 4 years? claimed from the companies A, B and C.
2. What is the accumulated value after 4 years of 1
4. Find the accumulated amount after 1 years
an immediate annuity of ` 3,000 p.a. with 2
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interest compounded at 10% p.a.? if a sum of ` 15,000 is invested at the end of

3. After investing ` 20,000 at the end of each every half-year at 14% p.a. compounded
year for some years, Mr. Khan received an semi-annually.
accumulated amount of ` 65,562. If the 5. Find the present value of an immediate
interest was compounded at 9% p.a. find the annuity of ` 20,000 p.a. for 3 years at
number of years. 14% p.a. compounded annually.
4. Find the rate of interest compounded per 6. Find the accumulated value at the end of
annum if an immediate annuity of ` 10,000 4 years and the present value of an immediate
per year amounts to ` 20,500 in 2 years. annuity of ` 50,000 p.a. for 4 years at 4% p.a.
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 Std. XII : Commerce (Maths - II)
7. Akshara Co. has decided to set up a sinking 9. Which of the following is an example of
fund to create an accumulated amount of perpetual annuity?
` 45,00,000 at the end of 3 years, by investing (A) Hire – purchase transactions
a fixed amount at the end of each of the (B) Life insurance policy
3 years in a deposit giving interest at 7% p.a. (C) Bank recurring deposits
compounded annually. What should be the (D) Life time pension policy

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annuity amount set aside each year?
10. A shop valued ` 2,00,000 is insured at 80% of
Multiple Choice Questions it’s value. If the rate of premium is 4%, then
the premium is

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1. Which of the following insurance is not (A) ` 6,400 (B) ` 6,000
covered by general insurance? (C) ` 6,450 (D) ` 6,500
(A) fire insurance

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(B) life insurance 11. Stock worth ` 4,00,000 is insured for
(C) accidental insurance ` 2,25,000. If agent’s commission is ` 2400 at
(D) marine insurance the rate of 12%, then the amount of premium
paid is
2. The value of the property insured is called (A) ` 30,000 (B) ` 40,000
_______.
(C) ` 20,000 (D) ` 10,000

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(A) property value (B) premium
(C) policy value (D) claim 12. A property valued at ` 3,50,000 was insured
3. The period for the fire insurance policy is for 2,50,000. Property worth ` 1,75,000 was
_______.
(A) one year
(C) three years
(B) two years
(D) four years
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can be done under the policy?
(A) ` 1,00,000
(B) ` 1,25,000
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4. The amount which can be demanded under the
(C) ` 75,000
policy is _______.
(A) policy value (B) premium (D) ` 1,50,000
(C) interest (D) claim 13. If the rate of premium on life policy of
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5. Property value   _______ 

gives
 gives ` 65,000 for 25 years is ` 55 per year per
premium thousand, what is the total premium paid?
(A) policy value (A) ` 89,375 (B) ` 87,375
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(B) rate of premium (C) ` 35,750 (D) ` 88,375

(C) agent’s commission
(D) agent’s rate of commission 14. If the claim under the policy is ` 4,000 and
ratio of property value to policy value is 5:4
6. Premium is paid on _______ value. then loss occurred is
(A) property (B) policy (A) ` 4,400 (B) ` 4,000
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(C) insured (D) both (B) and (C) (C) ` 5,000 (D) ` 5,500
7. In annuity calculations, the interest is usually
15. The present value of an immediate annuity of
taken as _______.
` 10,000 paid each quarter for four quarters at
(A) simple interest per annum
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16% p.a. compounded quarterly is ` _______.

(B) interest compounded every year
(C) interest compounded per month (A) 40,000 (B) 36,300
(D) simple interest per month (C) 36,286.75 (D) 36289.25

8. An annuity in which each payment is made at 16. The accumulated amount after 3 years of an
the end of period is called? immediate annuity of ` 5,000 p.a. with interest
(A) annuity due rate of 6% compounded annually is
(B) annuity certain ` _______.
(C) immediate annuity (A) 15,000 (B) 15,900
(D) uniform annuity (C) 15,921.23 (D) 15,918
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 Chapter 03: Insurance and Annuity
17. A gadget costing ` 13,000 was bought making 25. The relation between accumulated annuity ‘A’
a down payment of ` 3,000 and agreeing to and present value ‘P’ is
repay the remaining by making four equal 1 1 i 1 1 i
payments at the end of each year, for 4 years, (A) – = (B) – =
A P C P A C
with interest rate compounded at 14% p.a. The
annual instalment would be ` _______. 1 1 i 1 1 C
(C) + = (D) + =

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(A) 3,435.10 (B) 3,432.05 P A C A P i
(C) 3,436.05 (D) 3,532.05
Answers to Additional Practice Problems
18. An annuity in which the terminal date is not

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known, is called as _______. Based on Exercise 3.1
(A) infinity (B) foreverity
1. i. ` 32,400 ii. ` 16,200
(C) perpetuity (D) none of these

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2. ` 2,250 8%. 3. ` 9,000, ` 450
19. The present value of an immediate annuity for
4 years at 10% p.a. compounded annually is 4. ` 63,000 5. ` 26,000
` 23,400. It’s accumulated value after 4 years 6. ` 1050
would be ` _______.
Based on Exercise 3.2

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(A) 31,145.40 (B) 34,259.94
(C) 10,859.94 (D) 3,114.54 1. ` 29,282 2. ` 13,923
20. A company sets aside ` 80,000 at the end of
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every year to create a sinking fund. What will
be the amount at the end of 4 years at 9% p.a.? 5. ` 22,522.81 6. ` 13,310
(A) ` 365850.32 (B) ` 36558.32 7. ` 24,333.75 8. ` 6, 620
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(C) ` 36855.32 (D) ` 36550.32
Based on Miscellaneous Exercise – 3
21. If the amount works out to be ` 53,680, for an
annuity of ` 10,000 paid at the end of each 1. i. ` 81,900 ii. ` 9,10,000
year with interest compounded at 20% p.a., iii. 14 lakhs
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then the number of years are

(A) 3 (B) 4 2. 150
(C) 2 (D) 1 3. ` 1,666.67, ` 2,000, ` 2,666.67
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22. If an immediate annuity of ` 60,000 paid for 4. ` 48,223.50

3 years amounts to ` 1,98,600, what is the rate
of interest compounded p.a.? 5. ` 46,432.64
(A) 10% (B) 11% 6. ` 2,12,323.20 and ` 1,81,494.76
(C) 10.5% (D) 9%
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7. ` 13,99,732.50
23. For an immediate annuity paid for 4 years
Answers to Multiple Choice Questions
with interest compounded at 10% p.a., the
present value is ` 12,679.46. What is its 1. (B) 2. (C) 3. (A) 4. (D)
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accumulated value after 4 year? 5. (A) 6. (B) 7. (B) 8. (C)

(A) ` 19,564 (B) ` 19,565 9. (D) 10. (A) 11. (C) 12. (B)
(C) ` 18,564 (D) ` 18,565 13. (A) 14. (C) 15. (B) 16. (D)
17. (B) 18. (C) 19. (B) 20. (A)
24. If for an immediate annuity r = 10% p.a.,
21. (B) 22. (A) 23. (C) 24. (A)
P = ` 12,679.46 and A = ` 18,564, then the
25. (B)
amount of each annuity paid is
(A) ` 4,000 (B) ` 4,500
(C) ` 3,500 (D) ` 4,200
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