Answer to Question #263455 in Financial Math for Sarwar

Question

What is the present value of Rs 10,000 due in two years at 8% p.a,C.I according at the interest is paid (a) yearly or (b) half yearly

Answer 1

a) $A=10,000$$n=2$

$i=0.08$

Using the yearly means

$A=P(1+i)^n$

$10,000=P(1+0.08)^2$

$10,000=P(1.08)^2$

$10,000=1.1664P$

$P=Rs 8,573$

b) Half yearly

The formula is; $A=P(1+i/2)^2n$

$10,000=P(1+0.08/2)^4$

$10,00=P(1.04)^4$

$10,000=1.1699P$

$P=Rs8,548$