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Question
Choose the correct alternative :
You get payments of ₹8,000 at the beginning of each year for five years at 6%, what is the value of this annuity?
Options
₹ 34,720
₹ 39,320
₹ 35,720
₹ 40,000
Solution
P' = `("C"(1 + "i"))/"i"[1 - (1 + "i")^-"n"]`
P' = `(8000(1 + 0.06))/(0.06)[1 - (1 + 0.06)^-5]`
= `(8000(1.06))/(0.06)[1 - (1.06)^-5]`
= (1,41,333.33)(0.25274)
∴ P' = ₹35,720.
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