Question
An insurance investment plan offers a maturity value of
₹5,00,000 after 5 years. If the opportunity cost of capital is 9% compounded annually, calculate the present value of this investment and advise whether it exceeds the investment cost of ₹3,25,000.Solution
PV = 5,00,000 / (1.09)5 = 5,00,000 / 1.53862 = ₹3,24,896. Hence, marginally below investment of ₹3,25,000.
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