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

Answer:

see attachment.............

Answer 2

Answer:

The present value is $1246.50$

Explanation:

$\begin{aligned}\text { Present value } &=A\left[\frac{(1+b)^{n}-1}{b(1+b)^{n}}\right] \\&=1000\left[\frac{(1+0.8)^{10}-1}{\left.(0.8)(1+0.8)^{10}\right]}\right.\\&=1000\left[\frac{357.046-1}{(0.8)(357.046)}\right.\\&=1000\left[\frac{356.046}{285.637}\right] \\&=1000[1.24 .6] \\&=1246.500\end{aligned}$