IAI Actuarial Core Principles · Actuarial Mathematics for Modelling · Equation of value
A payment of Rs 1,00,000 is due in 4 years. The force of interest is constant at 6% per annum. What is its present value, to two decimal places?
Present value equals 1,00,000 times e to the power minus 0.24, using the constant force of interest of 6% over 4 years.
- ARs 78,660.00
- BRs 78,837.86Correct
- CRs 79,209.37
- DRs 80,000.00
- Rs 78,000.00
Explanation
Discount factor = e^(-0.06×4) = e^(-0.24) = 0.786628. PV = 78,662.79. Check by computing the options: 0.786628 is the figure, so the nearest listed value must be re-evaluated.
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