CT1 Q&A Bank 1.37

can some one help me in this question 1.37 pg-13 ques bank.
why have they taken 200-10t while doing integration.
thanks

 

This is because 200-10t is the continuous rate of payment which needs to be summed up by use of integrals.

 

But 200- 10t is no where in the question. . Where did they get from?

 

How my approach is wrong..

 

You're actually quite close to getting the right answer.

Basically, the question says that the annuity is initially paid at a rate of $200 pa (continuously) but decreases linearly to $100 pa after 10 years. This means that the rate of payment is 200 - 10t where t is the time elapsed in years.

It appears that your calculation does not factor in the decreasing component. Your calculation would otherwise be correct if the annuity was simply paid at a rate of $200 pa without any adjustment over time.

Hope that helps!

 

Thank you so much