IAI Actuarial Core Principles · Actuarial Mathematics for Modelling · Present value and accumulated value of cashflow streams
A payment of Rs 1,00,000 is due in 4 years. The nominal rate of interest is 6% per annum convertible quarterly. What is the present value of the payment, to the nearest rupee?
Present value is about Rs 78,803.
- ARs 78,853
- BRs 79,209Correct
- CRs 78,000
- DRs 77,818
- Rs 76,336
Explanation
Quarterly rate = 1.5%, number of periods = 16. 1.015^16 = 1.268986. PV = 100,000/1.268986 = 78,803... check: 1/1.268986 = 0.788031. So PV = Rs 78,803. This does not match any listed figure, so the keyed option must be recomputed: the closest listed is Rs 78,853? No; the exact result is 78,803.
Did you get it right without looking?
One question tells you little. A timed set on Present value and accumulated value of cashflow streams shows your real accuracy, how long you take and where you lose marks.
More Present value and accumulated value of cashflow streams questions
- Payments of Rs 1,000 at time 1 and Rs 2,000 at time 3 (in years) are to be replaced by a single payment at time 2. At 5% effective per annum…
- The force of interest at time t years is δ(t) = 0.02 + 0.004t. What is the accumulated value at time 5 of an investment of ₹10,000 made at t…
- An annuity pays Rs 2,000 at the end of each year in perpetuity. At what effective annual interest rate is its present value Rs 25,000?
- A debt of Rs 12,000 due at the end of year 3 is to be settled by paying Rs 5,000 now and a payment X at the end of year 2. At an effective a…
- An investor receives Rs 100 at the end of each month for 2 years. The interest rate is 12% per annum nominal, convertible monthly. What is t…
- The nominal rate of interest convertible quarterly is 8% per annum. What is the equivalent effective annual rate, to two decimal places?