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A person wants to have Rs.2 lac annually for 20
years by investing the amount in an annuity
interest rate of 5%. He will have to invest:
a. Rs.24 lac
b. Rs.2492440
c. Rs.2429000
d. Rs.25 lac​

1 Answer

3 votes

Answer:

The Present value of investment is Rs 2492442 , option B

Explanation:

Given as :

The future value of investment after 20 years = f = Rs 200000

The Time period = n =20 years

The rate of interest applied = r = 5% = .05

Let The present value of investment = P

Now, From Equation

Present value = Future value × [
(1 - (1 +r)^(-n))/(r) ]

or, P = f × [
(1 - (1 -r)^(-n))/(r) ]

Or, P = Rs 200000 × [
(1 - (1 +0.05)^(-20))/(0.05) ]

Or, P = Rs 200000 ×
(1-0.376889482)/(.05)

Or, P = Rs 200000 ×
(0.623110518)/(0.05)

Or, P = Rs 200000 × 12.46221036

Or, P = Rs 2492442.072

So, The present value = P = Rs 2492442

Hence, The Present value of investment is Rs 2492442 , option B . Answer

User Shamaleyte
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