PRC-2 · Chapter 5 · Question 8 of 50
Calculate the present value of an ordinary annuity where Rs. 4,000 is paid at the end of each year for a duration of 10 years, discounted at an interest rate of 5% per annum.
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 30,887
Explanation
Using the PV of an ordinary annuity formula: PV = R * [1 - (1 + i)^-n] / i. PV = 4000 * [1 - (1.05)^-10] / 0.05. PV = 4000 * [1 - 0.6139] / 0.05 = 4000 * 7.7217 = Rs. 30,886.94.
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