Time Value of Money

Question 1: If you deposit Rs. 1,00,000 for 10 years at an interest of 8%

per year compounded annually. How much money will you have at the
end of 10 years ?

Excel Soultion: =fv(rate,nper,pmt,pv,type)

Question 2: You win a lottery of Rs.10,00,000 and invest it in 1 year

fixed deposit scheme with ICICI Bank at an interest of 8% per year
compounded quarterly. How much money will you have at the end of
10 years ?

Solution: =fv(0.02,40,0,-1000000)

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Question 3: If you deposit Rs.5,000 every year in bank (8% per annum)
for 5 consecutive years from now, calculate the amount of money I
would have at the end of the 5th year ?

Solution: =fv(0.08,5,-5000,0,0)

Question 4: If a 20 year old plans to invest Rs.10,000 per month till he

turns 60 (last payment at 60). What is the amount of money he would
have accumulated when he turns 60?

A) Deposited in bank fixed deposits @ 7.5% p.a.

B) Invested in Nifty (assume it gives 15% p.a.)

Solution:

A) =fv(0.075/12,40*12,-10000,0)
B) =fv(0.15/12,40*12,-10000,0)

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Question 5: Assuming I am 60 (just retired today) and my monthly
expenses can be met with Rs.1,00,000. From the end of this month I
would require Rs.1,00,000 every month till I am 90 years old. What is
the amount of money I need to deposit in the bank today that allows
me to withdraw Rs.1,00,000 every month till I turn 90? (Assume the
bank balance would be 0 when I turn 90)

Solution: =pv(0.08/12,30*12,100000,0)

Question 6: I am 20 years old, my monthly expenses are Rs.1,00,000

per month. I will retire at the age of 60. Life expectancy is 90 years.
What is the amount of money that I need to deposit/ invest every
month (starting one month from now, till the age of 60) to accumulate
the required retirement corpus that would be sufficient to meet my
needs for the age of 60 to 90.

A) You invest in Nifty (15% p.a.)

B) You invest in Junior Nifty (17% p.a.)
C) You invest in Gold (9% p.a.)
D) You invest in Bank fixed deposit (7.5% p.a.)

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Solution is divided into three parts:

A) Calculating my monthly expenses at 60 years -

=fv(0.06,40,0,100000)
B) Calculating the PV of an monthly payments from 60 to 90:
=pv(0.075/12,30*12,1028000,0)
C) Calculating payments to be made in the bank to accumulate the
calculated amount by 60: =pmt(0.075/12,40*12,0,147000000,0)

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