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Question
Find the amount of an ordinary annuity of ₹ 500 payable at the end of each year for 7 years at 7% per year compounded annually. [(1.07)7 = 1.6058]
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Solution
Given a = ₹ 500, i = 0.07, n = 7
P = `"a"/"i" [(1 + "i")^"n" - 1]`
= `500/0.07 [(1 + 0.07)^7 - 1]`
= `500/0.07 [(1.07)^7 - 1]`
= 7142.85 [1.6058 − 1]
= 7143 (6.6058)
= ₹ 4,327
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