Present Value Calculation:

To calculate the present value of Rs.10,000 to be required after 5 years, we need to use the formula for present value:

Present Value = Future Value / (1 + r)n

Where,
r = interest rate (9%)
n = number of compounding periods (5)
Future Value = Rs.10,000

Substituting the values in the formula, we get:

Present Value = 10,000 / (1 + 0.09)5
Present Value = 10,000 / 1.65
Present Value = 6,060.60

Therefore, the present value of Rs.10,000 to be required after 5 years, if the interest rate is 9% compounded annually, is Rs.6,060.60.

Explanation:

The present value is the current value of a future amount of money, discounted back to the present at the given interest rate. In this case, we are given a future value of Rs.10,000 to be received after 5 years and an interest rate of 9% compounded annually.

To calculate the present value, we use the present value formula which takes into account the future value, interest rate and the number of compounding periods. We substitute the values in the formula and get the present value of Rs.6,060.60.

This means that if we invest Rs.6,060.60 today at an interest rate of 9% compounded annually, we will have Rs.10,000 after 5 years. The present value calculation is important in financial decision making as it helps in evaluating the worth of future cash flows in terms of today’s money.

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