Answer:
OPTION C i.e 11%
Option A i.e 30.55 year
Explanation:
we know that capital can be calculated as
[tex]Capital = EMI \times PVIFA[/tex]
[tex]capital = EMI \times \frac{(1+r))^n -1}{r (1+r)^n}[/tex]
from the data given in question we can calculate the value of r
so
[tex]5890.2 = 1250 \times \frac{(1+r))^7 -1}{r (1+r)^7}[/tex]
[tex]4.7122 = \frac{(1+r))^7 -1}{r (1+r)^7}[/tex]
solving for r we get
r = 11%
option C
we know that
[tex]Total\ saving = cash flow \times FVIFA[/tex]
[tex]= Cash\ flow \times \frac{(1+r)^n -1}{r}[/tex]
from the data given we can evealueate the value of n
[tex]8,452,622 = 40,000 \times \frac{(1.11)^n -1}{0.11}[/tex]
[tex]\frac{8452622}{40000}\times 0.11 = (1.11)^n -1[/tex]
solving for n we get
n = 30.55 year.
Option A
