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An ordinary annuity pays Rs. 4,000 annually for 20 years. If the required rate of return is 8%, what is its approximate present value?
  1. Rs. 35,000
  2. Rs. 39,727
  3. Rs. 45,000
  4. Rs. 50,000
Explanation

For an ordinary annuity:

PV=PMT×1−(1+r)−n/r​

PMT = Rs. 4,000

r = 8% = 0.08

n = 20 years

PV ≈ Rs. 39,727

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