Question

Find the amount of an ordinary annuity of 12

monthly payments of Rs. 1000 that earn an interest

at 12% per year compounded monthly.​

Answer 1

Question :- Find the amount of an ordinary annuity of 12 monthly payments of Rs. 1000 that earn an interest at 12% per year compounded monthly. ?

Solution :-

we have given that, rate is compounded monthly ,

So,

• Rate of interest = (12/12) = 1% per month
• Time = 1 year = 1 * 12 = 12 months.

Now, The equation for calculating the present value of an ordinary annuity is :-

• PVOA = PMT * (PVOA factor for n = 12 months ; i = 1% per month.)

Now, we have to use PVOA factor from PVOA Table . (Refer to image .) (Table is uploaded for future help).

So,

• PVOA factor for n = 12 months and i = 1% from table is = 11.255 .

Therefore,

→ PVOA = Rs.1000 times [ 11.255 ]

→ PVOA = 1000 * 11.255

→ PVOA = Rs.11255 (Ans.)

Hence, the amount of an ordinary annuity is Rs.11255 .