Question

To find the present value of a sum of Rs. 10,000 to be received at the end of each year for the next 5 years at 10% rate, we use:

Answer 1

Present value of annuity table.

Answer 2

Given:

A sum of Rs. 10,000 to be received at the end of each year for the next 5 years at a 10% rate

To find:

The present value

Solution:

The sum of money to be received at the end of 5 years i.e., A = Rs. 10000

The rate of interest, R = 10%

The no. of years, n = 5 years

Let's assume "P" represents the present value of money.

To find the value of the present value, we will use the compound interest and the formula of compound interest is as follows:

$\boxed{\bold{A = P [1 + \frac{R}{100} ]^n}}$

Now, substituting the given values in the above formula, we get

$10000 = P [1 + \frac{10}{100} ]^5$

$\implies 10000 = P [ \frac{110}{100} ]^5$

$\implies 10000 = P [ 1.1 ]^5$

$\implies 10000 = P \times 1.61051$

$\implies P = \frac{10000}{1.61051}$

$\implies \bold{P = 6209.21}$

Thus, the present value is → Rs. 6209.21.

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