Mathematics for FinanceMTP Sep 24 Series IIQuestion 1542 of 512
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The present value of an annuity which pays 200\displaystyle 200 at the end of each 3\displaystyle 3 months for 10\displaystyle 10 years, assuming money to be worth 5%\displaystyle 5\% converted quarterly.

Options

A3473.86\displaystyle 3473.86
B3108.60\displaystyle 3108.60
C114180.44\displaystyle 114180.44
DNone of these
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Correct Answer

✅ Option d — None of these

All Options:

  • A3473.86\displaystyle 3473.86
  • B3108.60\displaystyle 3108.60
  • C114180.44\displaystyle 114180.44
  • DNone of these

Detailed Solution & Explanation

The present value (PV\displaystyle PV) of the quarterly annuity is: PV=A×[1−(1+i)−ni]PV = A \times \left[ \frac{1 - (1+i)^{-n}}{i} \right] Given: * Quarterly payment (A\displaystyle A) = 200\displaystyle 200 * Time (n\displaystyle n) = 10×4=40\displaystyle 10 \times 4 = 40 periods * Periodic interest rate i=5%4=1.25%=0.0125\displaystyle i = \frac{5\%}{4} = 1.25\% = 0.0125 Substituting the values: PV=200×[1−(1.0125)−400.0125]≈6,265.38PV = 200 \times \left[ \frac{1 - (1.0125)^{-40}}{0.0125} \right] \approx 6,265.38 The options are 3473.86\displaystyle 3473.86, 3108.60\displaystyle 3108.60, 114180.44\displaystyle 114180.44, and None of these. Since the mathematical value is 6,265.38\displaystyle 6,265.38: Hence, **Option D** is the correct answer.

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