Suppose your mom decides to gift you rs 10000 every year starting from today for the next sixteen years. You deposit this amount in a bank as and when you recieve and get 8.5% per annum interest rate compounded annually. What is the present value of this money?

Question

Answer

Calculation of Present Value of Money

Given Information:

Amount received every year = Rs. 10,000

Number of years = 16 years

Interest rate = 8.5% per annum

Compounded annually

Formula for Present Value of Annuity:

PV = (A * ((1 - (1 + r)^-n) / r)) * (1 + r)^-n

PV = Present Value

A = Annuity

r = Rate of Interest

n = Number of Years

Calculation:

Here, A = Rs. 10,000, r = 8.5% and n = 16 years

Using the formula, we get:

PV = (10,000 * ((1 - (1 + 0.085)^-16) / 0.085)) * (1 + 0.085)^-16

PV = Rs. 1,10,680.66

Explanation:

The present value (PV) of an annuity is the value of a stream of payments, discounted by the rate of interest to reflect the time value of money. In this case, the stream of payments is Rs. 10,000 received every year for 16 years. We need to calculate the present value of all these payments received over the 16-year period.

We use the formula for present value of annuity to calculate the present value of the stream of payments. The formula uses the rate of interest, number of years, and the annuity amount to calculate the present value of the annuity.

After calculating the present value of the annuity, we get the present value of all the payments received over the 16-year period as Rs. 1,10,680.66.

Similar CA Foundation Doubts

Suppose your mom decides to gift you ` 10,000 every year starting from today forthe next five years. You deposit this amount in a bank as and when you receive and get 10% perannum interest rate compounded annually. What is the present value of this annuity?

Suppose your father decides to gift you Rs.10 000 every year starting from today for the next five years you deposit this amount in a bank as and when you receive and get 10% per annum interest fata compounded annually.What is the present value of this annuity? (

Suppose your parent decides to open PPF account in your name with rs 10000 every year starting from today for next 15 years. When you receive and get 8.5% per annum interest rate compounded annualy. What is the present value of this annuity??? Options A:83042 B:166084 C:93042 D:111667?

A man lent Rs 1,600 on compound interest pertly at 8% per annum compounded annually and partly at 9% per annum compounded semi-annually. If the total interest received after one year was Rs 142.43, how much did he lend at 8% per annum?

Determine the compound amount and compound interest on Rs.1000 at 6%compounded semi annually for 6 years.given that (1 i)n =1.42576 for i=3%and n=12.kindlly give your answer.!?

Top Courses for CA FoundationView all

Quantitative Aptitude for CA Foundation

Principles and Practice of Accounting

Business Laws for CA Foundation

Business Economics for CA Foundation

Mock Tests & Past Year Papers for CA Foundation

Top Courses for CA Foundation

Top Courses for CA Foundation

Suggested Free Tests

Related Content

CA Foundation Courses

Other Courses

How To Prepare?

Other Exams

Company