ASSIGNMENT 1

B.Tech (EE), Semester - Vth, Aug-Dec 2022

Attempt all the given questions (2 marks each)
Q:1. A person deposits a sum of Rs 1,00,000 in a bank for his son’s education who will be
admitted to a professional course after 6 years. The bank pays a 10% interest rate,
compounded semi-annually. Find the future amount of the deposited money at the time of
admitting his son in the professional course.?

Q:2. A financial institution introduces a plan to pay a sum of Rs 15,00,000 after 10 years at the
rate of 12%, compounded annually. Find the annual equivalent amount that a person should
invest at the end of every year for the next 10 years to receive Rs 15,00,000 after 10 years from
the institution?

Q:3. The cost of erecting an oil well is Rs 1,50,00,000. The annual equivalent yield from the oil
well is Rs 30,00,000. The salvage value after its useful life of 10 years is Rs 2,00,000. Assuming
an interest rate of 18%, compounded annually, find out whether the erection of the oil well is
financially feasible, based on the present worth method.

Q:4. Alpha Finance Company is coming with an option of accepting RS 10,000 now and paying
a sum of Rs 1,60,000 after 20 years. Beta Finance Company is coming with a similar option of
accepting Rs 10,000 now and paying a sum of Rs 3,00,000 after 25 years. Compare and select
the best alternative based on the future worth method of comparison with 15% interest rate,
compounded annually.

Q:5. Briefly explain the following terms with suitable examples:

i) Time value of money
ii) Salvage value