Question

What is the accumulated value after 4 years of an immediate annuity of Rs. 8000 p.a.,the rate of interest being 8% p.a.

Answer 1

SI = 8000×4×8/100 = 80×4×8 = 2560 = SI

A= SI+P = 2560+8000 =10560

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Answer 2

The answer is Rs. 10884.

Given,

Present value (PV) = Rs. 8000

The rate of interest(r) = 8%

Total time(t) = 4 years

To Find,

The accumulated value after 4 years =?

Solution,

From the formula of future value,

Future value = $FV = PV (1 + r)^t$

Putting values in this equation, we get

$FV = 8000(1 + 8/100)^4\\FV = 8000(1 + 0.08)^4\\FV = 8000(1.08)^4\\FV = 8000 * 13.6\\FV = 10883.9$

FV = Rs. 10884 (Approx)

Hence, the accumulated value after 4 years will be Rs. 10,884.