00:01
Now, in this problem, we are given that we need to find the present value of an annuity which pays rs.
00:07
200 at the end of 3 months for 10 years and also the rate of interest is 5 % compounded quarterly.
00:22
Now, to find the present value of an annuity, we are going to use the formula for present value of a series of cash flow and the formula we have, the present value is equals to p is the cash flow amount times 1 -1 plus r whole to the power minus n divide by r.
00:44
Here r is the rate of interest and n is the total number of periods.
00:50
Now, n we have equals to 10 times 4 because every 3 months you are getting the money.
00:59
So, in 1 year you will get 4 times, so in 10 years this would be 10 times 4, so 40.
01:07
Now, rate of interest is 5 % quarterly, so you have to take 5 divide by 4 % which is equals to 0 .05 divide by 4.
01:17
Now, just put all these values here to find the present value...