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Question
Find the accumulated value of annuity due of ₹1,000 p.a. for 3 years at 10% p.a. compounded annually. [Given (1.1)3 = 1.331]
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Solution
Given C = ₹1,000, n = 3 years, r = 10% p.a.
∴ i = `"r"/(100) = (10)/(100)` = 0.1
Now, A = `("C"(1 + "i"))/"i"[(1 + "i")^"n" - 1]`
∴ A = `(1,000(1 + 0.1))/(0.1)[(1 + 0.1)^3 - 1]`
= `(1,000(1.1))/(0.1)[(1.1)^3 - 1]`
= (1,000)(11)[1.331 – 1]
= 11,000(0.331)
∴ A = 3,641
∴ Accumulated value of annuity due is ₹3,641.
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For annuity due,
C = ₹ 20,000, n = 3, I = 0.1, (1.1)–3 = 0.7513
Therefore, P = `square/0.1 xx [1 - (1 + 0.1)^square]`
= 2,00,000 [1 – 0.7513]
= ₹ `square`
The future amount, A = ₹ 10,00,000
Period, n = 20, r = 5%, (1.025)20 = 1.675
A = `"C"/"I" [(1 + "i")^"n" - 1]`
I = `5/200` = `square` as interest is calculated semi-annually
A = 10,00,000 = `"C"/"I" [(1 + "i")^"n" - 1]`
10,00,000 = `"C"/0.025 [(1 + 0.025)^square - 1]`
= `"C"/0.025 [1.675 - 1]`
10,00,000 = `("C" xx 0.675)/0.025`
C = ₹ `square`
