CLASS EXERCISE-1

1.Calculate the present value of Rs.600

a)received one year from now

b)received at the end of five years

c)received at the end of fifteen years

Assume 5% time preference rate

2.Assuming 10% discount rate, compute the present value of Rs.1100,Rs.900,Rs.1500 and Rs.700
received at the end of one through four years.

3.Company XYZ is establishing a sinking fund to retire Rs.50000 ,8 % debentures,10 years from
today.

The company plans to put a fixed amount into the fund each year for 10 years.

The first payment will be made at the end of the current year. The company anticipates that the
funds will earn 6% a year. What equal contributions should be made to accumulate Rs.5,00,000 ,10
years from now?

4.An executive is about to retire at the age of 60.His employer has offered him two post retirement
schemes.

a)Rs.20,00,000 lumpsum

0r

b)Rs.250000 for 10 years.

Assuming 10% rate of interest which option is better.

5.A limited company borrows from a commercial bank Rs.10,00,000 at 12% p.a of rate of interest to
be paid in equal annual end of year instalments. What would the size of instalment be? Assume the
repayment period of 5 years.

6.From the following prepare a repayment schedule in which loan with interest is to repaid in three
equated annual instalments.

Loan amount Rs.2,40,000

Repayment period 3 years

Rate of interest 6%

7.XYZ Bank pays 12% and compound interest quarterly. If Rs.1000 is deposited initially, how ,much
shall it grow at the end of 5 years?