Calculating Annuity Due and Sinking Fund Surplus
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Calculating the Future Value of an Annuity Due
Step 1: Determine the Variables
The problem provides the following details:
- Annual payment: Rs. 200. Therefore, the half-yearly payment (Pmt) is:Rs. 200 / 2 = Rs. 100Rs. 200 / 2 = Rs. 100
- Annual interest rate (r): 4% or 0.04. Since the interest is compounded half-yearly, the interest rate per period (i) is:0.04 / 2 = 0.020.04 / 2 = 0.02
- Term: 20 years. Payments are made half-yearly, so the total number of periods (n) is:20 × 2 = 4020 × 2 = 40
- The annuity type is an annuity due, meaning payments are made at the beginning of each period.
Step 2: Apply the Future Value Formula
The formula for the Future Value (FV) of an annuity due is given by: