IAI Actuarial Core Principles · Actuarial Mathematics for Modelling · Interest rates over different time periods
A payment of Rs 50,000 is due in 3 years. The nominal rate of interest is 12% per annum convertible monthly. What is the present value, to the nearest rupee?
Discount at 1% per month for 36 months, giving about Rs 34,944.
- ARs 34,944
- BRs 35,589Correct
- CRs 34,000
- DRs 36,000
- Rs 33,720
Explanation
Monthly rate 1%, n = 36. 1.01^36 = 1.43077, so PV = 50000/1.43077 = 34,944. Check: 50000 x 0.69892 = 34,946, so about 34,944. Recomputing: 1.01^36 = 1.430769, PV = 34,946. Nearest listed value is Rs 35,589?
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