TIME VALUE OF MONEY

Time Value of Money concept can be used to find the followings:
1.
2.

Future value of single amount compounded annually under compound interest system.
Future value of single amount compounded more than once in a year under compound interest system.

3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.

Future value of mixed stream.
Future value of an ordinary annuity.
Future value of an annuity due.
Future value of mixed stream with embedded annuity (ordinary r due).
Present value of single amount compounded annually under compound interest system.
Present value of a single amount compounded more than once in a year under compound interest system.
Present value of a mix stream.
Present value of an ordinary annuity.
Present value of an annuity due.
Present value of mixed stream with embedded annuity (ordinary o due).
Perpetuity.
Loan Amortization schedule.
Effective interest rate.
Interest rate and time period.
Growth rates.
Others

1.
2.

How many concepts are there in the concept of time value of money?
18
On 1-1-2000, Mr. A deposited Rs.1000 in a bank. If bank credits his account @10% per annum
compounding annually, find his balance on 31-12-2004?
FV=1610.51

3.

On 1-1-2000 Mr. A deposited Rs.1000 in a bank. If bank credits his account @10% per annum
compounding semi-annually, find his balance on 31-12-2004?
FV=1628.895

4.

Mr. A deposited Rs.1000 on 1-1-2000 and Rs.2000 on 1-1-2001. Find his balance on 31-12-2002 if bank
credits his account @10% per annum compounded annually?
FV=3751

5.

Mr. A deposited Rs.1000 on 1-1-2000 and Rs.2000 on 1-1-2001. Find his balance on 31-12-2002 if bank
credits his account @10% per annum compounded semi-annually?
FV=3771.108

6.

Mr. A deposited Rs.1000 on 1-1-2000 and Rs.2000 on 1-1-2001 and Rs.1000 on 31-12-2002. Find his
balance on 31-12-2002 if bank credits his account @10% per annum compounded annually?
FV=4851

7.

Mr. A deposited Rs.1000 on 1-1-2000 and Rs.2000 on 1-1-2001 and Rs.1000 on 31-12-2002. Find his
balance on 31-12-2002 if bank credits his account @10% per annum compounded semi- annually?
FV=4873.608

8.

Mr. A deposited Rs.1000 on 1-1-2000 and Rs.1000 on 1-1-2001 and Rs.1000 on 1-1-2002. Find his
balance on 31-12-2002 if bank credits his accounts @ 10% per annum?
FV=3641

9.

Mr. A deposited Rs.1000 on 1-1-2000 and Rs.1000 on 1-1-2001 and rs.1000 on 1-1-2002. Find his balance
on 31-12-2002 if bank credits his accounts @ 10% per annum compounded monthly?
FV=3673.286

10. Mr. A deposited Rs.2000 on 31-12-2000 and Rs.1000 on 31-12-2001 and Rs.1000 on 31-12-2002. Find his
balance on 31-12-2002 if bank credits his accounts @ 10% per annum?

find the principal he should deposit now? PV=1227.2000 on 31-12-2005. Find his balance on 31-12-2006 if bank credits his accounts @ 10% per annum? FV=7750.2000 at the end of 5 years from now.1000 on 1-1-2000. find his balance on 31-12-2006? FV=7772. On 1-1-2000.1000 on 31-12-2001 and Rs.1000 on 1-1-2000.1000 on 1-1-2000 and Rs. If the balance at the end of the two years is Rs. A deposited Rs. Mr. If bank credits his accounts @ 10 % per annum compounded annually.84 22. Mr. find the principal he should deposit now? PV=1220. If bank credits his accounts @ 10% per annum compounding annually. A intends to receive Rs. On 1-1-2000. Mr.2000 at the end of 5 years from now.8809% 19.2000 at the end of a year for 5 years. If bank credits his accounts @ 10 % per annum compounded annually. find the level of deposit on 1-1-2000? PV= (ORDINARY ANNUITY) 25.1000 on 31-12-2000 and Rs.54 24. A deposited Rs.1 12. Mr. A purchased a treasury bill that has a face value of Rs.2000 on 1-1-2001 and Rs. Mr. Mr. find the level of deposit on 1-1-2000? PV= (ORDINARY ANNUITY) 27. A intends to receive Rs. A intends to receive Rs.837 14.173 15.1000 on 31-12-2001 and Rs.2000 at the start of every year for 5 years. find the level of deposit on 1-1-2000? PV=? (ANNUITY DUE) . time to maturity of 3 months and market price of Rs.1210. find the level of deposit on 1-1-2000? PV= (ORDINARY ANNUITY) 26.1000 on 31-12-2002 and Rs. If the balance at the end of the two years is Rs. Mr. find his rate of interest which is compounded quarterly? R=? 20. Mr. Mr.2000 on 31-12-2003. If banks credits his account @ 10% per annum compounded annually for the first 2 years and @ 9% compounded quarterly for the third year onwards.83 23.1000 on 1-1-2000 and Rs.FV=4972 11. If bank credits his accounts @ 10 % per annum compounded quarterly.annually.2000 at the end of a year for 5 years.3000 on 31-12-2005.1000 on 31-12-2002 and Rs.1000 on 31-12-2004 and Rs.980.1000 on 31-12-2002 and Rs. find actual rate of interest that an investor can earn per annum on such investment? R=? 21. Mr.1000 on 1-1-2000. Mr. If banks credits his account @ 10% per annum compounded annually till 31-12-2003 while semi-annually for the remaining life.619 16. If bank credits his accounts @ 10 % per annum compounded semi. Find his balance on 31-12-2003 if bank credits his accounts @ 10% per annum compounded annually? FV=6205. A intends to receive Rs. A deposited Rs. Mr.3000 on 31-12-2005. A deposited Rs. A intends to receive Rs. Mr. If the balance at the end of the two years is Rs.1000. Mr. after how long this deposit will be Rs. On 1-1-2000. A intends to receive Rs. find his rate of interest which is compounded annually? R=10 18.2000 on 31-12-2006. A deposited Rs. A intends to receive Rs.788 13. find his rate of interest which is compounded semi-annually? R=4. If bank credits his accounts @10 % per annum compounded semi. Find his balance on 31-12-2007? FV=9959. A deposited Rs. If bank credits his accounts @10 % per annum compounded quarterly.1210.1000 on 1-1-2000. On 1-1-2000. Find his balance on 31-12-2006 if bank credits his accounts @ 10% per annum compounded monthly? FV=7210.1331? N=3 17. A deposited Rs. Mr. find the principal he should deposit now? PV=1241. Mr.2000 at the end of 5 years from now.1000 on 31-12-2000 and Rs. Mr.annually. A deposited Rs.2000 at the end of a year for 5 years.1210. If bank credits his accounts @10 % per annum compounded annually.1000 on 31-12-2000 and Rs. A deposited Rs.2000 on 1-1-2001 and Rs.

find present value of perpetuity? Perpetuity 41. A intends to receive from a bank an amount of Rs.2000 at the start of every year for 3 years while Rs. On 1-1-2000. Find installments. A intends to receive Rs. Find installments. If bank credits his account @ 10% per annum compounding annually. If bank credits his accounts @ 10 % per annum compounded annually.100000 from a bank. If bank credits his accounts @ 10 % per annum compounded annually. A intends to receive Rs. If bank credits his accounts @ 10 % per annum compounded semi-annually. LOAN AMORTIZATION SCHEDUALE 36. find present value of perpetuity? Perpetuity 39. On 1-1-2000. Bank demands 5 equal end of year installments to repay. Mr. Right from 11th year onward from now.500 in 12th year and similar pattern of receipts forever. purchase computer on installments and pay him Rs. find the level of deposit on 1-1-2000? PV=? 35. A intends to receive from a bank an amount of Rs.2000 at the end of every six months for 5 years. find present value of perpetuity? Perpetuity 40. find the level of deposit on 1-1-2000? PV=? 30.1000 at the end of 11th year and Rs.1000 at the end of every year forever. If bank credits his account @ 10% per annum compounding annually.e. Mr. Mr. On 1-1-2000. find the level of deposit on 1-1-2000? PV=? 29. Mr. Mr. Mr. If bank credits his account @ 10% per annum compounding semi. If bank credits his accounts @ 10 % per annum compounded annually for 3 years and @ 12 % per annum for remaining life.1000 on outstanding loan? Which option is better and why? .50000 loan from MCB and pay loan to bank in 5 end of year equal installments where bank charges interest @ 40 paisa/day/Rs. On 1-1-2000. Mr. A has no cash but intends to purchase a computer on credit.2000 biannually for 3 times. A obtained a loan of Rs. A intends to receive Rs. LOAN AMORTIZATION SCHEDUALE 38.2000 at the start of every year for 3 years while Rs. find the level of deposit on 1-1-2000? PV=? 32.3000 at the end of every year for 4 years. If bank credits his accounts @ 10 % per annum compounded semi-annually.2000 at the end of every six months for 5 years. Mr. Bank demands 5 equal end of year installments to repay. LOAN AMORTIZATION SCHEDUALE 37. find the level of deposit on 1-1-2000? PV=? 34. Bank charges an interest of 40 paisa/day/Rs.50000. Mr. Mr. A intends to receive Rs.100000 from a bank. Mr. On 1-1-2000. Mr. two options are available to him i. Bank charges an interest rate of 10 % per annum compounded annually on outstanding balance.2000 biannually for 3 times. A obtained a loan of Rs. Bank charges an interest rate of 10 % per annum compounded semi-annually on outstanding balance.15000 at the end of every year for 5 years or get loan of Rs. find the level of deposit on 1-1-2000? PV=? 33. Right from 11th year onward from now. A intends to receive from a bank an amount of Rs. A intends to receive Rs. Right from 11th year onward from now. If bank credits his accounts @ 10 % per annum compounded monthly. Find installments. The cash price of computer is Rs. A intends to receive Rs. On 1-1-2000. Bank demands 5 equal end of year installments to repay. A intends to receive Rs.1000 at the end of every year forever.2000 at the end of every six months for 5 years.1000 on outstanding balance. Mr.28.3000 at the end of every year for 4 years. Mr. If bank credits his accounts @ 10 % per annum compounded annually.annually.100000 from a bank. On 1-1-2000. find the level of deposit on 1-1-2000? PV=? 31. A obtained a loan of Rs.

5000 at the end of 2 years from now he will deposit Rs. Mr. how much additional amount he will deposit at the end of his 4th year so that he shall be able to receive the required amount on desired date? 43. how much additional amount he will deposit at the end of his 4 th year so that he shall be able to receive the required amount on desired date? .7000 at the end of 7 th year and Rs.4000. Now he has deposited Rs. Now he has deposited Rs. Mr.2400 at the end of every year from year 6 to 15 from now. A intends to receive Rs. if bank credits his account @ 10 % per annum compounding semi – annually.500 at the end of 2 years from now he will deposit Rs.2400 at the end of 5 th year. if bank credits his account @ 10 % per annum compounding semi – annually.4000.42.100000 at the end of 10th year from now. Rs. A intends to receive Rs.