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Question
Find the amount of an ordinary annuity of ₹ 600 is made at the end of every quarter for 10 years at the rate of 4% per year compounded quarterly. [(1.01)40 = 1.4889]
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Solution
Given a = ₹ 600, i = `4/4%` = 1% = 0.01, n = 10 × 4 = 40
P = `"a"/"i" [(1 + "i")^"n" - 1]`
= `600/0.01 [(1 + 0.01)^40 - 1]`
= `600/0.01 [(1.01)^40 - 1]`
= 60,000 [1.4889 − 1]
= 60,000 (0.4889)
= ₹ 29,334
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