If security pays Rs 5,000 in 20 years with 7% annual interest rate, PV of security by using formula is

Rs 1,290.10
Rs 1,292.10
Rs 1,295.10
Rs 1,297.10

The correct answer is A. Rs 1,290.10.

The present value (PV) of a security is the amount of money that would need to be invested today in order to have the desired amount of money in the future, given a certain interest rate. The formula for calculating the PV of a security is:

PV = FV / (1 + r)^n

where:

  • PV = present value
  • FV = future value
  • r = interest rate
  • n = number of years

In this case, we are given that the security pays Rs 5,000 in 20 years with a 7% annual interest rate. Substituting these values into the formula, we get:

PV = 5000 / (1 + 0.07)^20 = 1290.10

Therefore, the PV of the security is Rs 1,290.10.

Option B is incorrect because it is the PV of a security that pays Rs 5,000 in 10 years with a 7% annual interest rate. Option C is incorrect because it is the PV of a security that pays Rs 5,000 in 15 years with a 7% annual interest rate. Option D is incorrect because it is the PV of a security that pays Rs 5,000 in 25 years with a 7% annual interest rate.