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A person decides to invest ₹1,25,000 per year for the next five years in an annuity which gives 5%
per annum compounded annually. What is the approx future value?(use 1.05ହ = 1.2762, if needed)?
per annum compounded annually. What is the approx future value?(use 1.05ହ = 1.2762, if needed)?
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A person decides to invest ₹1,25,000 per year for the next five years ...
To calculate the future value of an annuity where a person invests ₹1,25,000 annually for five years at an interest rate of 5% per annum compounded annually, we can use the future value of an annuity formula.
Future Value of Annuity Formula
The formula is:
\[ FV = P \times \frac{(1 + r)^n - 1}{r} \]
Where:
- \( FV \) = Future Value
- \( P \) = Annual Payment (₹1,25,000)
- \( r \) = Annual interest rate (5% or 0.05)
- \( n \) = Number of years (5)
Calculating Future Value
1. **Plug in the values**:
- \( P = 1,25,000 \)
- \( r = 0.05 \)
- \( n = 5 \)
2. **Calculate \((1 + r)^n\)**:
- \((1 + 0.05)^5 = 1.2762\)
3. **Substitute back into the formula**:
\[ FV = 1,25,000 \times \frac{1.2762 - 1}{0.05} \]
4. **Simplify**:
- \((1.2762 - 1) = 0.2762\)
- \(\frac{0.2762}{0.05} = 5.524\)
5. **Final Calculation**:
\[ FV = 1,25,000 \times 5.524 = 6,905,000 \]
Approximate Future Value
The approximate future value of the annuity after five years is:
- **₹6,90,500**
This amount signifies the total investment value accumulated over the investment period with the interest applied.
Future Value of Annuity Formula
The formula is:
\[ FV = P \times \frac{(1 + r)^n - 1}{r} \]
Where:
- \( FV \) = Future Value
- \( P \) = Annual Payment (₹1,25,000)
- \( r \) = Annual interest rate (5% or 0.05)
- \( n \) = Number of years (5)
Calculating Future Value
1. **Plug in the values**:
- \( P = 1,25,000 \)
- \( r = 0.05 \)
- \( n = 5 \)
2. **Calculate \((1 + r)^n\)**:
- \((1 + 0.05)^5 = 1.2762\)
3. **Substitute back into the formula**:
\[ FV = 1,25,000 \times \frac{1.2762 - 1}{0.05} \]
4. **Simplify**:
- \((1.2762 - 1) = 0.2762\)
- \(\frac{0.2762}{0.05} = 5.524\)
5. **Final Calculation**:
\[ FV = 1,25,000 \times 5.524 = 6,905,000 \]
Approximate Future Value
The approximate future value of the annuity after five years is:
- **₹6,90,500**
This amount signifies the total investment value accumulated over the investment period with the interest applied.
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A person decides to invest ₹1,25,000 per year for the next five years in an annuity which gives 5% per annum compounded annually. What is the approx future value?(use 1.05ହ = 1.2762, if needed)?
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A person decides to invest ₹1,25,000 per year for the next five years in an annuity which gives 5% per annum compounded annually. What is the approx future value?(use 1.05ହ = 1.2762, if needed)? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about A person decides to invest ₹1,25,000 per year for the next five years in an annuity which gives 5% per annum compounded annually. What is the approx future value?(use 1.05ହ = 1.2762, if needed)? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A person decides to invest ₹1,25,000 per year for the next five years in an annuity which gives 5% per annum compounded annually. What is the approx future value?(use 1.05ହ = 1.2762, if needed)?.
A person decides to invest ₹1,25,000 per year for the next five years in an annuity which gives 5% per annum compounded annually. What is the approx future value?(use 1.05ହ = 1.2762, if needed)? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about A person decides to invest ₹1,25,000 per year for the next five years in an annuity which gives 5% per annum compounded annually. What is the approx future value?(use 1.05ହ = 1.2762, if needed)? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A person decides to invest ₹1,25,000 per year for the next five years in an annuity which gives 5% per annum compounded annually. What is the approx future value?(use 1.05ହ = 1.2762, if needed)?.
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