Test Index

Time Value of Money

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Question : 97 of 99

Marks: +1, -0

The future value of annuity on Rs. 5000 a year for 7 years at

14\%

per annum compound interest is given

(1.14)^{7}=2.5023

Rs.5300
Rs.53653.57
Rs.5480
Rs.5465.23

Solution:

Concept:

Use the future value of annuity formula:

FV = P \times \frac{(1+r)^n - 1}{r}

.

Explanation:

Given

P = 5000

,

r = 0.14

,

n = 7

, and

(1.14)^7 = 2.5023

.

Compute

(1.14)^7 - 1 = 2.5023 - 1 = 1.5023

.

Divide by

r

:

\frac{1.5023}{0.14} = 10.7307142857

.

Multiply by

P

:

5000 \times 10.7307142857 = 53653.5714285 \approx 53653.57

.

Answer:

Rs. 53653.57

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