At a discount rate of 10% per annum, what is the present value of Rs. 5,000 payable after one year and Rs. 8,000 payable after two years?
Correct answer: D. Rs. 11,157.02
- A. Rs. 10,500.00
- B. Rs. 11,000.00
- C. Rs. 11,300.00
- D. Rs. 11,157.02
Explanation
Each cash flow is discounted to the present separately. The value is 5,000 divided by 1.10 plus 8,000 divided by 1.10^2, which equals approximately Rs. 11,157.02.
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About Financial Mathematics: Interest, Annuities and Discounting
Financial mathematics covers simple and compound interest, principal, rate, time, accumulated value and present value. It also includes annuities, regular payments, sinking funds, loan repayments and discounting, with a distinction between ordinary annuities and annuities due and between trade discount and mathematical discount.
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