Math's

Puzzle
(Annuity)
C A S A C H I N L OYA
 Particulars Situation (1) Situation (2) Situation (3)
Analyze the situation to get Mr. X inherited a sum of Mr. Y has savings of Mr. Z earns monthly salary
the answer Rs.100,000 from his grand Rs.50,000 which he of Rs.25,000 out of which
father which he invested in invested in bank of India for he deposits 40% amount
SBI for 10 years at 10%, but 5 years at 6%, and the bank every month in Bank of
the bank does not pay has policy of paying interest Maharashtra in an account
interest on interest earned on interest earned in earlier which pays him interest at
in earlier years. Find the years. Find the amount after 9% compounded monthly.
amount after 10 years. 5 years. Find the amount of his
investment after 5 years.
Recurring / non-recurring
Number of times the
deposit is made
Number of times interest is
earned
Interest type (SI/CI)
Answer

?
 PQ 1 : Inst. Investment Principle Number Cumulative multiplying Amount
Mr. X invests time of cycles factor (CMF) (P x CMF)
Rs.6,000 at the 1 year 1 6,000 6 1.05x1======
beginning of each 2 year 2 1.05x1=====
year from his income
into stock market 3 year 3 1.05x1====
where he earns 5% 4 year 4 1.05x1===
return compounded 5 year 5 1.05x1==
annually. Find his
investment after 6 6 year 6 1.05x1=
years. Total Investment

PQ 2 : Inst. Investment Principle Number CMF Amount

Mr. Y invests time of cycles (P x CMF)
Rs.5,000 at the 1 End of year 1
start of each year
from his income into 2 End of year 2
a bank where he
3 End of year 3
earns 10% return
compounded 4 End of year 4
annually. Find his
investment after 5 5 End of year 5
years. Total Investment
 PQ 3 : Inst. Investment Principle Number CMF Amount
Mr. X invests time of cycles
Rs.7,500 at the start 1 year 1 7,500
of each year from his
2 year 2
income into post
office where he 3 year 3
earns 8% return 4 year 4
compounded
5 year 5
annually. Find his
investment after 6 6 year 6
years. Total Investment
Calculator trick : [(1.08 x 1 ====== GT)] x 7,500
PQ 4 : Inst. Investment Principle Number of CMF Amount
Mr. X invests time cycles
Rs.5,000 at the start 1 1st half year
of each 6 months
into post office at 2 2nd half year
8% CI semi annual 3 3rd half year
compounding. Find 4 4th half year
his investment after
2.5 years. 5 5th half year
Total Investment
Calculator trick : [(1.03 x 1 ===== GT) ] x 5,000
 PQ 5 : Inst. Investment Principle Number Cumulative multiplying Amount
Mr. X invests time of cycles factor (P x CMF)
Rs.10,000 at the 1 End of year 1 10,000 5
end of each year 2 End of year 2
from his income into
stock market where 3 End of year 3
he earns 12% return 4 End of year 4
compounded 5 End of year 5
annually. Find his
investment after 6 6 End of year 6
years. Total Investment

PQ 6 : Inst. Investment Principle Number Cumulative multiplying Amount

Mr. Y invests time of cycles factor (P x CMF)
Rs.20,000 at the 1 End of year 1
end of each year
from his income into 2 End of year 2
a bank where he
3 End of year 3
earns 10% return
compounded 4 End of year 4
annually. Find his
investment after 5 5 End of year 5
years. Total Investment
 PQ 7 : Inst. Investment Principle Number Cumulative multiplying Amount
Mr. X invests time of cycles factor
Rs.7,500 at the end 1 End of year 1 7,500
of each year from his
2 End of year 2
income into post
office where he 3 End of year 3
earns 8% return 4 End of year 4
compounded
5 End of year 5
annually. Find his
investment after 6 6 End of year 6
years. Total Investment
Calculator trick : [(1.08 x 1 ===== GT) + 1 ] x 7,500
PQ 8 : Inst. Investment Principle Number of Cumulative Multiplying Amount
Mr. X invests time cycles factor
Rs.5,000 at the end 1 End of 6 m
of each 6 months
into post office at 2 End of 12 M
8% CI semi annual 3 End of 18 M
compounding. Find 4 End of 24 M
his investment after
2.5 years. 5 End of 30 M
Total Investment
Calculator trick : [(1.03 x 1 ==== GT) + 1 ] x 5,000
PQ 9
Sr. Particulars Multiplying Number of GT of (GT +1) Amount
(assume annuity regular i.e., investments factor cycles multiplying [ (GT +1) x P ]
are made at the end of each period) factor
1. A sum of Rs.3,000 is invested for 3 years
at intervals of 3 months at 12%
2. A sum of Rs.5,000 was invested for 4
years at an intervals of 6 months at 5%
3. A sum of Rs.2,500 was invested at 6% for
2 years at monthly intervals
PQ 10
Sr. Particulars Multiplying Number of GT of (GT +1) P=
(assume annuity regular i.e., investments factor cycles multiplying [ A / (GT +1) ]
are made at the end of each period) factor
1. A certain sum is invested for 3 years at
the end of every 3 months at 12% which
accumulated to Rs.90,829, find recurring
sum
2. A certain sum is invested at 10% for 4
years at the end of every 6 months which
accumulated to Rs.52,520, find annuity
PQ 11

Sr. Particulars Multiplying Number GT (GT +1) P=

factor of cycles [ A / (GT
+1) ]
1. Mr. X needs Rs.50,000 at the end of 5 years from
now, he wish to create a sinking fund where he will
earn 15% pa, find amount to be invested at the
end of each quarter
2. Mr. X needs Rs.30,000 at the end of 4 years from
now, Bank of India pays 4% half yearly
compounding, find the amount to be invested at
the end of each half year.
3. X need Rs.30,000 at the end of 5 years from now,
SBI pays 5% interest at semi annual compounding,
find the single amount to be invested today to get
required amount.
4. Mr. P need Rs.100,000 in 20 years from now, CI is
5% pa compounded semi annually, find the half
yearly annuity amount to be invested at the end of
every half year.
 I can save 40% of my salary
every month, which I can
invest in a bank, I will be
able to accumulate money
for buying house after 5
years.

Future Value of Investment

If I buy a house today by

taking a loan, I can easily
pay off the loan in 5 years
from my salary, I can pay up
to 40% of salary as
installment of the loan.

Present Value of Installments

 A sum of
Present Rs.10,000 is Future
Value due on Value
01.01.2015

Present value @ 5% as on 01.01.2012. Future value @ 5% as on 31.12.2020

PQ 12
Sr Particulars PV / FV Answer
1. A debtor from whom Rs.30,000 is due after 1 year is ready to pay the sum today, if your
cost of capital is 12%, find the amount which you can receive today to settle the
transaction
2. Rs.25,000 is due from a debtor today, the debtor is requesting to allow additional 1
year’s credit, cost of capital is 10%, find the amount which you will receive after 1 year
from debtor.
3. A creditor to whom we owe Rs.50,000 after 1 year is ready to accept it today at some
discount. If your cost of capital is 10%, how much amount you should pay today
4. A creditor to whom we owe Rs.50,000 today, but you wish to pay it after 2 years. If rate of
interest is 15% under CI, how much amount you should pay after 2 years.
PQ 13
Sr Particulars Interest Principle
1. Mr. X has borrowed a sum of Rs.100,000 @ 12% from a bank on 01.01.2021 out of which
he is repaying Rs.10,000 on last day of year 1. Bifurcate interest and principal
2. Mr. X has borrowed a sum of Rs.100,000 @ 12% from a bank on 01.01.2021 out of which
he is repaying Rs.10,000 on same day. Bifurcate interest and principal
3. Mr. X has invested a sum of Rs.20,000 @ 10% on last day of year 5, he decided to liquidate
his investments at the end of year 5, bifurcate amount receivable into interest and principal
4. Mr. X has invested a sum of Rs.20,000 @ 10% on first day of year 5, he decided to liquidate
his investments at the end of year 5, bifurcate amount receivable into interest and principal

Sr. Concept Conclusion

1. In case of Future value, no interest will be earned on last installment made In case of regular annuity
at the last day of the year. FVF of last year = 1
2. In case of present value, no interest will be deducted on first installment In case of annuity due
paid at the first day of first year PVF of first year = 1

Present value factor @ 12% Future value factor @ 12%

Annuity type
Year 1 Year 2 Year 3 Total Year 1 Year 2 Year 3 Year 4
Due
Regular
PQ 14

Sr. Particulars Annuity Last FVF for FVF of Total FVF

type installment last remaining
date year years
1. Mr. X is investing in a bank @ 6% at yearly installments
of Rs.25,000 for a period of 20 years. First investment
will be done on last day of the first year.
2. Mr. X is investing in a bank @ 6% at yearly installments
of Rs.25,000 for a period of 20 years. First investment
will be done on first day of the first year.

PQ 15

Sr. Particulars Annuity First PVF of year PVF of Total PVF

type payment 1 remaining
date years
1. Mr. X has borrowed a sum of Rs.500,000 @ 7%
on 01.01.21 which he will be repaying in yearly
installments starting from 31.12.21.
2. Mr. X has borrowed a sum of Rs.500,000 @ 7%
on 1.1.21 which he will be repaying in yearly
installments starting from 1.1.21.
PQ 16
Sr. Particulars Annuity PVF FVF PV FV
type
1. Mr. X is making recurring annual payment of
Rs.25,000 for 30 years at the beginning of Due
each year (interest rate 10%)
2. Mr. X is making recurring half yearly payment
of Rs.20,000 for 10 years at the end of each Regular
half year. (interest rate is 12%)
3. A man is making quarterly payments for 20
quarters, first payment is being made on first
day of first quarter (interest rate is 6%)
4. An IIT professor decided to make semi annual
payments of Rs.25,000 for a period of 6 years
at the end of each half year. (rate = 5%)
5. A student decided to keep aside a sum of
Rs.500 every month for a period of 2 years at
the beginning of each month (rate = 12%)
6. Rahul is making monthly payments of
Rs.6,000 for a period of 18 months at the
end of each month (Rate = 15%)
PQ 17
Sr. Particulars Single sum FV / PV
1. Rohan wish to accumulate Rs.500,000 in 10 years from now. He can pay a
Rs.500,000
portion of his salary to the bank every month.
2. Komal is willing to buy a car for which she need a sum of Rs.300,000 from
Rs.300,000
bank, she is ready to repay the loan in monthly installments out of her salary.
3. Vikas is ready to Deposit Rs.5,00,000 into bank, he wish to have a certain
Rs.500,000
sum every month for next 10 years to meet his household expenses.
4. Nutan is taking out every month a certain sum from a bank as loan, at the
end of 15 years she has repaid her outstanding amount along with interest Rs.10,00,000
which amounted to Rs.10,00,000.
5. Gaurav used to keep aside Rs.4,500 from his earnings every month. At the
Rs.25,00,000
end of 20 years, he could accumulate Rs.25,00,000.
6. Bhavesh was taking a sum of Rs.3,000 every month from a moneylender for
a period of 25 years. At the end of 25 years, he had to pay back Rs.15,00,000
Rs.15,00,000 as loan + interest.
7. Mr. X is a private sector employee, at the time of retirement he was given an
option to get his gratuity all at once which could have been Rs.500,000, but
he choose to take out it in equal monthly installments in 10 years (wherein he Rs.500,000
will be credited some interest every month on the portion remaining
unwithdrawn)
PQ 18
Sr Particulars FV / Annuity FVF / PVF Annuity Single
PV Type amount sum
1. A sum of Rs.3,500 is being paid every 6 months (total Regular 3,500
installments 30) against a loan taken, rate of interest is
10%, find amount of loan ?
2. Gaurav has borrowed a sum of Rs.10,00,000 from bank of Regular 10,00,000
India at 6% pa, the loan is to be repaid in 10 years in
quarterly installments. Find annuity
3. Bhavesh has deposited a sum of Rs.400,000 into a bank at Regular
12% pa. He wish to get annual pension from this amount
over a period of 10 years. How much amount he will get
each year?
4. A sum is borrowed @ 10% pa of which repayment is being Due
made in 6 equal half yearly installments of Rs.15,000 each.
Find amount of loan.
5. X is ready to deposit a certain sum in a bank (which pays Due
12% pa) for his uncle’s hospital expenditure which is
approximately Rs.40,000 per year, for a period of 20 years.
If the rate is 10% pa, find the sum to be deposited.
PQ 19
S Particulars FV / Annuity FVF / PVF Annuity Single Total
r PV Type amount sum Interest
1. Mr. X is a trader of Machineries. An asset
which has cash price of Rs.10,00,000 is to be
given on lease for a period of 10 years. Lease Regular
rentals are payable at each half year. Interest
rate is 12%. Find amount of lease rentals.
2. Mr. Y wants to buy a house after 10 years from
now. Which costs Rs.20 lacs today but
expected to cost 20% more in 10 years. Find Due
quarterly installments to accumulate required
amount in 10 years (Interest = 10% pa)
3. Mr. X has bought a car for Rs.500,000, 20%
amount is paid as down payment and balance
Regular
financed by Shriram Finance @ 15% pa.
Installments are payable monthly over 5 years.
4. Mr. X has taken an insurance policy of which
annual premium is Rs.20,000 (payable
quarterly). Term of policy is 8 years. Expected Regular
rate of return 7% pa compounded quarterly.
Find expected maturity value.
PQ 20
S Particulars FV / Annuity FVF / PVF Annuity Single Total
r PV Type amount sum Interest
1. A sinking fund is to be created to accumulate
an amount required to redeem 500 debentures
of Rs.1,000 redeemable in 10 years at 5%
premium. How much amount should be kept
aside from profits at the end of each year if it
earns 12% pa.
2. An asset can be acquired under lease rentals
of Rs.15,000 payable at the end of every
month for a period of 5 years. Cost of capital is
10%. Find effective cash cost of the asset
3. A car is bought for Rs.500,000, down payment
Rs.100,000. Balance financed by SBI @
10%pa. Find equated monthly installment
payable at the start of each period, if tenure of
loan is 4 years.
4. A person kept investing Rs.10,000 every month
at the end of each month over 2 years. Interest
rate 15% pa. What will be the amount
accumulated one month after 24th payment.
PQ 21
annual Annuity Annuity
Sr time FV / PV FVF / PVF Single sum n
Rate Type amount
1. Semi a) 10 years c) 8 years
12% FV Regular 15,000 1,97,119
annual b) 5 years d) 12 years
2. a) 6 years b) 7 years
annual 10% PV Regular 10,000 53,3450
c) 8 years d) 9 years
3. Every a) 15 month b) 18 month
12% FV Regular 5,000 98,073
month c) 21 month d) 24 month
4. Each a) 3 years b) 3.5 years
15% PV Regular 11,500 142,840
quarter c) 4 years d) 4.5 years
PQ 22
Sr Particulars Annuity PVF PV of Cash price Choice Net
Type annuity benefit
1. A computer is available for Rs.50,000 on
cash basis. The same computer can be
bought on EMI’s of Rs.4,200 payable over Regular
15 months. If cost of capital is 12%pa.
which alternative is better.
2. A lathe machine is available on cash
basis for Rs.20 Lacs. A finance firm is
ready to lease out the machine @
Regular
Rs.75,000 payable semi annually for 20
years. If the cost of capital is 10% pa,
which option is suitable.
3. A machine can be sold on cash basis for
Rs.7.5 Lacs. One customer is ready to
take the machine on lease where he will
Regular
be paying annually Rs.1.25 lacs for 10
years. If cost of capital is 12%, which
alternative is better for the seller.
PQ 23
Sr Particulars Annuity PVF PV of lease Cash price Who is
Type rentals benefited
from lease
1. A machine is available under two alternatives a) Lessor
a) Cash basis Rs.8.5 Lacs b) Lessee
b) Lease basis, in which lease rentals of
Regular
Rs.85,000 are payable semi annually over
10 years.
Cost of capital is 15% pa.
2. A machine is available under two alternatives a) Lessor
a) Cash basis Rs.6.25 Lacs b) Lessee
b) Lease basis, in which lease rentals of
Regular
Rs.80,000 are payable annually over 10
years.
Cost of capital is 5% pa.
3. A machine is available under two alternatives a) Lessor
a) Cash basis Rs.6.25 Lacs b) Lessee
b) Lease basis, in which lease rentals of
Due
Rs.80,000 are payable annually over 10
years.
Cost of capital is 5% pa.
PQ 24
Sr Particulars Annuity PVF PV of Capital Net Choice
Type annuity exp. present
value
1. A machine costs Rs. 50,000 and it will a) Buy
generate annual cash flows of b) Don’t
Regular
Rs.10,000 over 5 years. Cost of Capital buy
10%.
2. An attendance software costs
Rs.100,000, it can save monthly
Regular
employee costs of Rs.5,000 for a period
of 3 years. Cost of capital is 12%
3. A cleaning machine costs Rs.45,000, it
can save annual cleaning expenditure
Regular
of Rs.10,000 for a period of 8 years.
Cost of capital is 18% pa.
4. A machine which costs Rs.500,000 can
save monthly labour cost of Rs.20,000
Regular
for a period of 24 months. Cost of
borrowings is 12% pa.
PQ 25
A machine which costs Year Particulars Cash flows PVF Present
Rs.50,000 can generate value
annual cash inflows as given
below
Year 1 = Rs.25,000
year 2 = Rs.30,000
year 3 = Rs.15,000
Given cost of borrowings to be
12% pa. Find NPV
Should the Machine be bought ?
PQ 26
A machine which costs Year Particulars Cash flows PVF Present
Rs.65,000 can generate value
annual cash inflows as given
below
Year 1 = Rs.27,500
year 2 = Rs.22,500
year 3 = Rs.20,000
Given cost of borrowings to be
6% pa. Find NPV
Should the Machine be bought ?
PQ 27
Year Particulars Cash PVF Present
A machine which costs Rs.65,000 can
flows value
generate annual cash inflows as given
below
Year 1 = Rs.45,000
year 2 = Rs.40,000
year 3 = Rs.35,000
At the start of year 3 the machine will need
repairing cost of Rs.10,000.
Given cost of borrowings to be 12% pa.
Find NPV
PQ 28
A machine which costs Rs.70,000 can Year Particulars Cash PVF Present
generate annual cash inflows as given flows value
below
Year 1 = Rs.32,500
year 2 = Rs.(22,500)
year 3 = Rs.50,000
Year 4 = Rs.20,000
Given cost of borrowings to be 6% pa. Find
NPV