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Suppose your mom decides to gift you ₹10,000 every year starting from today for the next sixteen years. You deposit this amount in a bank as and when you receive and get 8.5% per annum interest rate compounded annually. What is the present value of this money?
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Suppose your mom decides to gift you ₹10,000 every year starting from ...
Present Value Calculation of Annual Gifts


  1. Given Information:
    • Annual gift amount: ₹10,000
    • Interest rate: 8.5% per annum
    • Compounded annually
    • Duration: 16 years




  2. Formula for Present Value Calculation:
    • Present Value = Future Value / (1 + r)^n
    • Where r is the interest rate and n is the number of years




  3. Calculating Future Value of Annual Gifts:
    • Using the formula for compound interest: FV = P(1 + r)^n
    • For each year, the future value of the gift would be: ₹10,000 * (1 + 0.085)^n
    • Summing up the future values for 16 years




  4. Calculating Present Value:
    • Using the formula: PV = FV / (1 + r)^n
    • Plugging in the values: PV = Total Future Value / (1 + 0.085)^16




  5. Final Calculation:
    • Calculate the total future value of all gifts over 16 years
    • Divide the total future value by (1 + 0.085)^16 to get the present value




By following the above steps, you can calculate the present value of the annual gifts from your mom over the next sixteen years with an 8.5% interest rate compounded annually.
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Suppose your mom decides to gift you ₹10,000 every year starting from today for the next sixteen years. You deposit this amount in a bank as and when you receive and get 8.5% per annum interest rate compounded annually. What is the present value of this money?
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Suppose your mom decides to gift you ₹10,000 every year starting from today for the next sixteen years. You deposit this amount in a bank as and when you receive and get 8.5% per annum interest rate compounded annually. What is the present value of this money? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Suppose your mom decides to gift you ₹10,000 every year starting from today for the next sixteen years. You deposit this amount in a bank as and when you receive and get 8.5% per annum interest rate compounded annually. What is the present value of this money? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Suppose your mom decides to gift you ₹10,000 every year starting from today for the next sixteen years. You deposit this amount in a bank as and when you receive and get 8.5% per annum interest rate compounded annually. What is the present value of this money?.
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