Question

Find the present value of $10,000 received at the start of every year for 20 years if the interest rate is J1 = 12% p.a. and if the first payment of $10,000 is received at the end of 10 years.

Answer 1

Explanation:

The person receives 10000 every month

for one year total principal 10000 * 12 = 120000

r= 12%p.a and t is 1yr

simple interest= 120000*12*1/100 = 14400

total money received in present year 120000 + 14400 = 134400

for 20 yrs principal becomes 10000*12*20= $2400000

simple interest = 2400000*12*20/100= $5760000

total amount received for 20 yrs = 2400000+ 5760000=8160000.

present value of principal as money receive 10000 for 10 yrs = 10000*10 = 100000

si = 100000*10*12/100= 120000

amount = $220000