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The present value of rs 10000 due in 2 years at 5% p.a compund interest when the interest is paid on half yearly basis is ?
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The present value of rs 10000 due in 2 years at 5% p.a compund interes...
Calculation of Present Value with Compound Interest:
- Given data:
- Principal amount (P) = Rs 10,000
- Time period (n) = 2 years
- Rate of interest (r) = 5%
- Interest compounded semi-annually
Formula for Compound Interest:
The formula to calculate the future value of an amount with compound interest is:
FV = P(1 + r/n)^(nt)
Where,
FV = Future Value
P = Principal amount
r = Rate of interest
n = Number of compounding periods per year
t = Time period in years
Calculation:
In this case, the interest is compounded semi-annually, so the number of compounding periods per year (n) = 2.
Using the formula:
FV = 10,000(1 + 0.05/2)^(2*2)
= 10,000(1 + 0.025)^4
= 10,000(1.025)^4
≈ Rs 11,038.41
Calculation of Present Value:
The present value (PV) is the current worth of a future sum of money or stream of cash flows given a specified rate of return. It can be calculated using the formula:
PV = FV / (1 + r/n)^(nt)
Substitute the values into the formula:
PV = 11,038.41 / (1 + 0.05/2)^(2*2)
= 11,038.41 / (1.025)^4
≈ Rs 10,000
Therefore, the present value of Rs 10,000 due in 2 years at 5% p.a compound interest when the interest is paid on a half-yearly basis is approximately Rs 10,000.
- Given data:
- Principal amount (P) = Rs 10,000
- Time period (n) = 2 years
- Rate of interest (r) = 5%
- Interest compounded semi-annually
Formula for Compound Interest:
The formula to calculate the future value of an amount with compound interest is:
FV = P(1 + r/n)^(nt)
Where,
FV = Future Value
P = Principal amount
r = Rate of interest
n = Number of compounding periods per year
t = Time period in years
Calculation:
In this case, the interest is compounded semi-annually, so the number of compounding periods per year (n) = 2.
Using the formula:
FV = 10,000(1 + 0.05/2)^(2*2)
= 10,000(1 + 0.025)^4
= 10,000(1.025)^4
≈ Rs 11,038.41
Calculation of Present Value:
The present value (PV) is the current worth of a future sum of money or stream of cash flows given a specified rate of return. It can be calculated using the formula:
PV = FV / (1 + r/n)^(nt)
Substitute the values into the formula:
PV = 11,038.41 / (1 + 0.05/2)^(2*2)
= 11,038.41 / (1.025)^4
≈ Rs 10,000
Therefore, the present value of Rs 10,000 due in 2 years at 5% p.a compound interest when the interest is paid on a half-yearly basis is approximately Rs 10,000.
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The present value of rs 10000 due in 2 years at 5% p.a compund interest when the interest is paid on half yearly basis is ?
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The present value of rs 10000 due in 2 years at 5% p.a compund interest when the interest is paid on half yearly basis is ? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about The present value of rs 10000 due in 2 years at 5% p.a compund interest when the interest is paid on half yearly basis is ? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The present value of rs 10000 due in 2 years at 5% p.a compund interest when the interest is paid on half yearly basis is ?.
The present value of rs 10000 due in 2 years at 5% p.a compund interest when the interest is paid on half yearly basis is ? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about The present value of rs 10000 due in 2 years at 5% p.a compund interest when the interest is paid on half yearly basis is ? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The present value of rs 10000 due in 2 years at 5% p.a compund interest when the interest is paid on half yearly basis is ?.
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