Question

What is the capitalized value of a property fetching a net annual rent of Rs.1000 and the highest rate of interest prevalent being 5%, rate of interest is 8%?

(a) Rs.16500.00

(b) Rs.18500.00

(c) Rs.12900.00

(d) Rs.12500.00

I had been asked this question in an online quiz.

My question is taken from Values, Tax, Funds & Rents etc in division Valuation, Reports Technical and Design Data of Civil Engineering Drawing

Answer 1

Correct answer is (d) Rs.12500.00

Explanation: For Rs.5.00 interest, capital Rs.1000.00

To get Rs.1000.00 interest, capital = (100/5)*1000

= Rs.20000.00

In short capitalized value is – Net annual income*Year’s purchase

For the same net income if the rate of interest is 8% the capitalized value = 1000*(100/8)                                                                                                                                    = Rs.12500.00.