Test Index

Time Value of Money

© examsnet.com

Question : 86 of 99

Marks: +1, -0

Find the future value of annuity Rs. 1000 made annually for 7 years at interest rate of

14 \%

compounded annually is Given

(1.14)^{7}=2.5023

Rs.10730.71
Rs.10735
Rs.10734
Rs.10237

Solution:

Concept:

Future value of an ordinary annuity:

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

.

Explanation:

Here

P = 1000

,

r = 0.14

,

n = 7

, and

(1.14)^7 = 2.5023

.

Calculate

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

.

Divide by

r

:

\frac{1.5023}{0.14} = 10.7307142857

.

Multiply by

P

:

1000 \times 10.7307142857 = 10730.7142857

.

Rounded to two decimals: Rs. 10730.71.

Answer:

Rs. 10730.71

© examsnet.com

Go to Question:

Prev Question

Next Question