LOVELY PROFESSIONAL UNIVERSITY HOMEWORK 1 Form/LPUO/AP-3

Lovely School of Management Department of Management

Name of the faculty member: Vishal Chopra Course Title: Financial Management

Class: MBA Term: MTE Section S1006 Batch: 2010-12

Max. Marks Fifteen Date of Allotment:18th Jan Date of Submission: 28thJan,11

Q1. The Dhanalaxmi bank pays 12% interest & compounds interest quarterly. If one puts

Rs. 2,000 initially into a savings account, how much will it has grown in 5 ½ years?

Q2. If the nominal tare of interest is 12% per annum, calculate the effective rate of interest

When a sum is compounded (a) annually, (b) semi annually, (c) quarterly and (d)

monthly.

Q3. You are planning to buy a 200 square meters of land for Rs. 60,000. You will be required

to pay twenty equal annual instalments of Rs. 8213. What compound rate of interest

will you be paying?

Q 4. You have Rs. 6,000 to invest. How much would it take you to double your money if

interest rate is (a) 5%, (b)10%, (c)15% & (d)20%, assume annual compounding.

Would your answer change if compounding is done half yearly? Show computations.

Q5. Determine the present value of cash inflows of Rs. 4,000 at the end of each year for

Next4 years and Rs. 8,000 & Rs. 1,000 respectively at the end of years 5 & 6 .

The appropriate discount rate is 14%.

Q 6. Compute the Present value of each of the following cash flows using a discount

Rate 0f 13%:

1. Rs. 2,000 cash outflow immediately.

2. Rs. 6,000 cash inflow one year from now.

3. Rs. 6,000 cash inflow two year from now.

4. Rs. 4,000 cash outflow three year from now.

5. Rs. 7,000 cash inflow three year from now.

6. Rs. 3,000 cash inflow four year from now.

7. Rs. 4,000 cash inflow at the end of each of the next 5 years.