CA Foundation P3 · Chapter 4 · Question 7 of 10
The present value of an ordinary annuity of ₹10,000 per annum for 3 years at 8% per annum compounded annually is (to the nearest paisa):
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) ₹25,770.97
Explanation
PV = A[1 − (1 + i)^(−n)]/i = 10,000 x [1 − (1.08)^(−3)]/0.08. (1.08)³ = 1.259712, so (1.08)^(−3) = 0.793832 and the factor = 0.206168/0.08 = 2.577097. PV = ₹25,770.97. ₹32,464 is the future value and ₹27,832.65 is the annuity-due present value (x 1.08).
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