Question

What is the present value of a Rs. 1,000 ordinary annuity that earns 8% annually for a period of 10 years?​

Answer 1

• P*R*T/100
• 1000*8*10/100
• 800

Answer 2

Answer:

Rs. 6710

Step-by-step explanation:

Given: Rs. 1,000 ordinary annuity that earns 8% annually for a period of 10 years.

To find: Present value.

$\begin{aligned}&\mathrm{We} \text { have, } \mathrm{A}=\ 1000, \mathrm{r}=8 \%=0.08 \text { and } \mathrm{n}=10 \\&\Rightarrow \mathrm{V}=\frac{\mathrm{A}}{\mathrm{r}} \times\left[1-(1+\mathrm{r})^{-\mathrm{n}}\right] \\\end{aligned}$

Substituting values we get:

$V=\frac{1000}{0.08}*[1-(1+0.08)^{-10}]$

   $=12500*[1-(1.08)^{-10} ]\\=12500*0.5368\\=Rs. 6710$

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