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?
- Rs. 35,000
- Rs. 39,727
- Rs. 45,000
- 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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