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Sol. Akhil should invest in post office term deposit scheme with an interest rate of 7.5% to get 18000 at
the end of the year.
Time =6 Years
FVA=18000 R=?
FVA= 2500{[(1+r)^6-1]/r}
R = around 7.5% which will be available from post office deposit scheme
Client 3 - Jones is the third person on the client list. Jones had just started his career. Expecting that his
salary would increase at a certain rate every year, he worked out his savings on an average. He wants to
invest INR 36,000 per year for the first 4 years, INR 48,000 per year for the next 5 years and INR 60,000
per year for 6 years thereafter. He wants to know how much he would be able to earn after 15 years in
order to make a real estate investment at that time
Sol. For 15% investment the rate will be 8% from PPF account. This way jones will be able to earn INR
8,83,992
He started his annual investment for first 4 years with Rs.36000, for next 5 years Rs. 48000, for next 6
years Rs.60000
For 15 years investment the rate of interest will be 8% from PPF account.
: 36000 [ (1.08)^4-1/0.08 ]
: 162216
: 281616
:440160
Sol. Interest of 7.5% is taken from post office time deposit scheme. This tell us that he has to draw INR
24,716.5 every year so that no balance is left.
100000= a{ (1+0.075)^5-1/(0.075)(1.075)^5}
100000= A [0.435/0.1076]
100000 = A[4.0654]
A=24716
Case 7 - James is the next client scheduled to meet John. He has a piece of land and expects to receive a
certain rate of return every year. After working out his returns, he wants to invest INR 10,000 at the end
of the first year, INR 15,000 at the end of the second year and INR 20,000 each year from the third year
to the fifth year. He wants to know the present value of the stream of investment
Sol. The present value of the annuity has to be calculated from the post office term deposit scheme.
This will make the present value of the investment to be INR 67283.5
Here, n= 5 years and r=7.5% First year, 1st year =10000*0.930 =9300
Client 10 - The tenth person on the client list is Ravinder. He is scheduled to retire after 14 years. He
wants to invest in a retirement plan that would give him a perpetual annual income of INR 30,000 from
the beginning of the 15th year. So, he wants to know the amount he should invest now so as to meet his
criterion
Sol. Interest rate will be taken as 8% as the deposit is for 15 year in PPF. This will give us the present
value of the investment as INR 127673
Here, n=15 years and 8% of rate as the deposit is for 14 years from PPF account.
So, 30000/0.08 = 375000
So 375000= PV(1+0.08)^14
PV = Rs.127673
Client 11 - Amit the next client, who would meet John, is an employee in a software company. He
received a bonus of INR 25,000. He wants to invest the amount for a period of 7 years. He wants to
know the end amount of the investment. He also wants to know the worth of his investment at the end
of the tenure, keeping the inflation rate of 5% in view
Sol. Interest rate would be 9% from OBC Recurring deposit scheme. This makes the worth of his
investment to be INR 47986.3
=47,986.02
Client 12 - David is the next client on the client list. He needs an amount of INR 15,000 at the beginning
of each year from the 10th to 14th year in order to meet his child’s educational expenses. He wants to
know the amount he should invest at the end of each year from the 1st to 5th year from now at an
interest rate of 8%.
Sol. David should invest INR 7504 at the end of each year from the 1 st to 5th year in PPF account in
order to meet his child’s educational expemses.
PVA=15000*3.993 = 59895
44025= A[(1+0.08)5-1/0.08]
A= 44025/5867 = 7504.8