Question

What is the net present value of piece of property which would be value at Rs2 Lakhs at the end of 2 year?( Annual rate of increase = 5%)

Answer 1

Answer:

Annual rate of interest, R = 5%

Amount at the end of 2 years, A = Rs. 2,00,000

Time period, n = 2 years

Let the net principal value be denotes as Rs.“P”

Using the formula of compound interest, we get

A = P(1 + $\frac{R}{100}$)ⁿ

Or, 2,00,000 = P [1 + $\frac{5}{100}$]²

Or, 2,00,000 = (P * 21 * 21) / (20 * 20)

Or, P = (2,00,000 * 20 * 20) / (21 * 21) = Rs. 181405.89 ≈ Rs. 1,81,406

Hence, the net principal value of the property is Rs. 1,81,406.

Answer 2

Answer:

Answer:

Annual rate of interest, R = 5%

Amount at the end of 2 years, A = Rs. 2,00,000

Time period, n = 2 years

Let the net principal value be denotes as Rs.“P”

Using the formula of compound interest, we get

A = P(1 + \frac{R}{100}100R )ⁿ

Or, 2,00,000 = P [1 + \frac{5}{100}1005 ²

Or, 2,00,000 = (P * 21 * 21) / (20 * 20)

Or, P = (2,00,000 * 20 * 20) / (21 * 21) = Rs. 181405.89 ≈ Rs. 1,81,406

Hence, the net principal value of the property is Rs. 1,81,406.

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