Mathematics for FinancePYQ Jun 24Question 1478 of 512
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What is the present value of 5,000\displaystyle 5,000 to be obtained after six years if the interest rate is 5%\displaystyle 5\% per annum? for n=6,7,8,9\displaystyle n=6, 7, 8, 9 respectively. frac1(1.05)n=0.74261,0.71068,0.67686,0.64462\displaystyle \\frac{1}{(1.05)^n} = 0.74261, 0.71068, 0.67686, 0.64462

Options

A3,731\displaystyle 3,731
B3,553\displaystyle 3,553
C3,384\displaystyle 3,384
D3,223\displaystyle 3,223
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Correct Answer

✅ Option a — 3,731\displaystyle 3,731

All Options:

  • A3,731\displaystyle 3,731
  • B3,553\displaystyle 3,553
  • C3,384\displaystyle 3,384
  • D3,223\displaystyle 3,223

Detailed Solution & Explanation

The present value (PV\displaystyle PV) of a single future cash flow FV\displaystyle FV to be received after n\displaystyle n years at interest rate i\displaystyle i is: PV=FV(1+i)nPV = \frac{FV}{(1+i)^n} Given: * Future Value (FV\displaystyle FV) = 5,00,000\displaystyle 5,00,000 * Time (n\displaystyle n) = 6\displaystyle 6 years * Discount factor 1(1.05)6=0.74261\displaystyle \frac{1}{(1.05)^6} = 0.74261 Substituting the values: PV=5,000×0.74261=3713.05PV = 5,000 \times 0.74261 = 3713.05 The calculated value is approximately 3,713\displaystyle 3,713, which is closest to Option A (3,731\displaystyle 3,731). Hence, **Option A** is the correct answer.

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