Question

Find present value of annuity due of Rs. 20,000 p.a. for 3 years if
compound interest is 8% p.a.?​

Answer 1

Given, A= Rs 500, n=8

Also, r=  

100

8

​

×  

4

1

​

=0.02

∴V=  

r

A

​

×[1−(1+r)  

(−n)

]=  

0.02

500

​

×[1−(1.02)  

(−8)

]

Now, let x=(1.02)  

(−8)

 

⇒logx=−8log1.02=−8(0.0086)

⇒logx=−0.0688

⇒x=0.8535

⇒V=  

0.02

500

​

×[1−0.8535]= Rs. 3662.50

Thus, the present value of annuity is Rs. 3662.50.