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The present value of annuity of rupees 5000 per annum for 12 years at 4% p.a. CI annually is?
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The present value of annuity of rupees 5000 per annum for 12 years at ...
Understanding Present Value of Annuity
To calculate the present value of an annuity, we use the formula that incorporates the interest rate and the duration of the annuity.
Key Components
- Annuity Payment (PMT): 5000 rupees per annum
- Number of Years (n): 12 years
- Interest Rate (r): 4% per annum compounded annually
Present Value Formula
The formula for the present value (PV) of an annuity is:
PV = PMT × [(1 - (1 + r)^-n) / r]
Where:
- PMT = Payment per period
- r = Interest rate per period (as a decimal)
- n = Number of periods
Calculation Steps
1. Convert Interest Rate:
- r = 4% = 0.04
2. Substitute Values:
- PV = 5000 × [(1 - (1 + 0.04)^-12) / 0.04]
3. Calculate:
- (1 + 0.04)^-12 = (1.04)^-12 ≈ 0.636
- PV = 5000 × [(1 - 0.636) / 0.04]
- PV = 5000 × [0.364 / 0.04]
- PV = 5000 × 9.1
- PV ≈ 45500 rupees
Final Result
The present value of an annuity of 5000 rupees per annum for 12 years at 4% per annum compounded annually is approximately 45500 rupees.
This calculation helps in understanding the worth of future cash flows in today's terms.
To calculate the present value of an annuity, we use the formula that incorporates the interest rate and the duration of the annuity.
Key Components
- Annuity Payment (PMT): 5000 rupees per annum
- Number of Years (n): 12 years
- Interest Rate (r): 4% per annum compounded annually
Present Value Formula
The formula for the present value (PV) of an annuity is:
PV = PMT × [(1 - (1 + r)^-n) / r]
Where:
- PMT = Payment per period
- r = Interest rate per period (as a decimal)
- n = Number of periods
Calculation Steps
1. Convert Interest Rate:
- r = 4% = 0.04
2. Substitute Values:
- PV = 5000 × [(1 - (1 + 0.04)^-12) / 0.04]
3. Calculate:
- (1 + 0.04)^-12 = (1.04)^-12 ≈ 0.636
- PV = 5000 × [(1 - 0.636) / 0.04]
- PV = 5000 × [0.364 / 0.04]
- PV = 5000 × 9.1
- PV ≈ 45500 rupees
Final Result
The present value of an annuity of 5000 rupees per annum for 12 years at 4% per annum compounded annually is approximately 45500 rupees.
This calculation helps in understanding the worth of future cash flows in today's terms.
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The present value of annuity of rupees 5000 per annum for 12 years at 4% p.a. CI annually is?
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The present value of annuity of rupees 5000 per annum for 12 years at 4% p.a. CI annually is? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The present value of annuity of rupees 5000 per annum for 12 years at 4% p.a. CI annually is? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The present value of annuity of rupees 5000 per annum for 12 years at 4% p.a. CI annually is?.
The present value of annuity of rupees 5000 per annum for 12 years at 4% p.a. CI annually is? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The present value of annuity of rupees 5000 per annum for 12 years at 4% p.a. CI annually is? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The present value of annuity of rupees 5000 per annum for 12 years at 4% p.a. CI annually is?.
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