PRC-2 · Chapter 5 · Question 20 of 50
What is the present value of an ordinary annuity where Rs. 10,000 is received at the end of each year for 5 consecutive years, assuming a discount rate of 5%?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 43,295
Explanation
Using the PV of an ordinary annuity formula: PV = R * [1 - (1 + i)^-n] / i. PV = 10,000 * [1 - (1.05)^-5] / 0.05 = 10,000 * [1 - 0.7835] / 0.05 = 10,000 * 4.32947 = Rs. 43,295.
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