Test Index

Time Value of Money

Question : 64 of 99

Marks: +1, -0

14\%

(1.14)^{7}=2.5023

Solution:

Concept:

Future value of an annuity is the total value of a series of equal payments compounded at a given interest rate over time.

Explanation:

Use the formula for future value of an ordinary annuity:

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

Here,

P = 5000

r = 0.14

n = 7

, and

(1.14)^7 = 2.5023

Compute

\frac{(1.14)^7 - 1}{0.14} = \frac{2.5023 - 1}{0.14} = \frac{1.5023}{0.14} = 10.730714...

Then

FV = 5000 \times 10.730714 = 53653.57

Answer:

Rs. 53653.57, which corresponds to option B.

Go to Question:

Prev Question

Next Question