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Question

Z invests Rs. 10,000 every year starting for today for next 10 years. Suppose interest rate is 8% per annum compounded annually. Calculate future value of the annuity. Given that (1+0.08)10=2.15892500.

A
1,44,865.625
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B
1,56,454.875
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C
1,54,654.875
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D
1,44,568.625
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Solution

The correct option is B 1,56,454.875
Step-1: Calculate future value as though it is an ordinary annuity
Future value of the annuity as if it is an ordinary annuity
=10,000[(1+0.08)1010.08]
=10,000×14.4865625
=Rs.1,44,865.625
Step-2: Multiply the result by (1+i)
=1,44,865.625×(1+0.08)
=1,56454.875.

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