An annuity pays Rs. 1,000 at the end of each year for three years, with the first payment at the end of year 3. At 10% interest, what is its value today?
Correct answer: B. Rs. 2,055.25
- A. Rs. 1,867.43
- B. Rs. 2,055.25
- C. Rs. 2,486.85
- D. Rs. 2,735.54
Explanation
The three payments first have a value of Rs. 2,486.85 at the end of year 2. Discounting this amount for two years gives 2,486.85 divided by 1.10^2, or Rs. 2,055.25.
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