Mathematics for FinanceMTP Nov 18Question 1489 of 512
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Suppose your father decides to gift you 5,000\displaystyle 5,000 every year starts from today for the next four years. You deposit the amount is a bank and as and when you receive and get 10%\displaystyle 10\% per annum interest rate compound annually. The present value of this annuity is [P(3,0.10)=2.48685]\displaystyle [P(3,0.10) = 2.48685]

Options

A17,434.25\displaystyle 17,434.25
B17,344.25\displaystyle 17,344.25
C17,434.52\displaystyle 17,434.52
D17,344.52\displaystyle 17,344.52
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Correct Answer

✅ Option a — 17,434.25\displaystyle 17,434.25

All Options:

  • A17,434.25\displaystyle 17,434.25
  • B17,344.25\displaystyle 17,344.25
  • C17,434.52\displaystyle 17,434.52
  • D17,344.52\displaystyle 17,344.52

Detailed Solution & Explanation

Since payments start today, this is an annuity due. The present value (PVdue\displaystyle PV_{\text{due}}) is: PVdue=A+A×P(3,0.10)PV_{\text{due}} = A + A \times P(3, 0.10) Given: * Annual payment (A\displaystyle A) = 5,000\displaystyle 5,000 * Factor P(3,0.10)=2.48685\displaystyle P(3, 0.10) = 2.48685 Substituting the values: PVdue=5,000+5,000×2.48685=5,000+12,434.25=17,434.25PV_{\text{due}} = 5,000 + 5,000 \times 2.48685 = 5,000 + 12,434.25 = 17,434.25 Hence, **Option A** is the correct answer.

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