Question

Find the present value of a sequence of annual payments of Rs 25000 each , the first being made at the end of 5th year and the last being paid at the end of 12th year, if money is worth 6%.

• A. $122875$
• B. $102875$
• C. $132875$
• D. None of the above

Answer 1

The correct option is D None of the above

We know that formula of present value is

$V=\frac{A}{r}[\frac{1}{(1+\frac{R}{100}{)}^m}$$-\frac{1}{(1+\frac{R}{100}{)}^{m+n}}]$

We have annuity of $8$ terms $\left(n\right)$

For $4$ terms $\left(m\right)⟹m=4⟹m+n=12$

$V=\frac{25000}{0.06}[\frac{1}{(1+\frac{6}{100}{)}^4}$$-\frac{1}{(1+\frac{6}{100}{)}^{12}}]=Rs.122968.45$