Question

Find the present value of Rs. $2,000$ to be received at the end of $1\frac{1}{2}$ years at a $10\%$ nominal annual interest rate compounded quarterly.

• A. $1562.40$
• B. $2562.40$
• C. $3562.40$
• D. $4562.40$

Answer 1

The correct option is A $1562.40$

Let $P$ be required value.

We know the formula,
$A=P{(1+\frac{r}{n})}^{n.t}$
Given, $A=$ Rs. $2000$, $r=10\%$, $n=4$ and $t=$ $2\frac{1}{2}$ years
Therefore, $2000=P(1+\frac{0.1}{4}{)}^{4\times 2.5}$
$\Rightarrow 2000=P\times {1.025}^{10}$
$\Rightarrow 2000=P\times 1.280085$
$\Rightarrow P=\frac{2000}{1.280085}$
$\Rightarrow P=$ Rs. $1562.40$