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Question
Find the amount of an ordinary annuity of 12 monthly payments of ₹ 1,500 that earns interest at 12% per annum compounded monthly. [(1.01)12 = 1.1262]
Solution
Here a = 1,500, n = 1 year, and i = `12/100`
`"i"/"k" = (12/100)/12 = 1/100` = 0.01
A = `"a"/("i"/"k") [(1 + "i"/"k")^("nk") - 1]`
= `1500/0.01 [(1 + 0.01)^(1 xx 12) - 1]`
= `150000/1 [(1 + 0.01)^(1 xx 12) - 1]`
= 150000 [(1.01)12 – 1]
= 150000 [1.1262 – 1] ............[∵ (1.01)12 = 1.1262]
= 150000 [0.1262]
= ₹ 18,930
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