Test Index

Time Value of Money

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Question : 90 of 99

Marks: +1, -0

Find the Present value of Rs.10,000 to be required after 5 years, If the Interest be

9 \%

(1.09)^{5}=1.5386

Rs.6500
Rs.6499.42
Rs. 6600.52
Rs.6700.52

Solution:

Concept:

Present Value is the current worth of a future sum discounted at a given interest rate.

Explanation:

The formula for Present Value (PV) is:

PV = \frac{FV}{(1 + r)^n}

Here,

FV = 10000

,

r = 9\% = 0.09

,

n = 5

years, and

(1.09)^5 = 1.5386

(given).

So,

PV = \frac{10000}{1.5386}

.

Calculating:

10000 \div 1.5386 \approx 6499.42

.

Answer:

Rs. 6499.42

The correct option is B.

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