1 •You have a choice of investing in either of two accounts:

•Account A earns an annual rate of 5% with annual compounding

•Account B earns an annual rate of 5.25% at simple interest
•You plan to invest Rs 10,000 in one of the accounts today and withdraw the funds 4 years later. In wh

Account A

Account B

2 If you deposit Rs 10,000 in an account that pays an annual interest rate of 7%, If it is compounded ann

Q1. 1 year?
Q2. 5 years?
Q3. 10 years?

Q1
Q2
Q3

3. You have just purchased an investment property for Rs 400,000. You expect the value of the property to incre
do you expect the property to be worth after 10 years?

Amount Today
400000

4. If I deposit Rs100 into an account earning 10% per year, how much will my deposit be worth after 5 years?

PV :
I:
 n:
FV?
5. What if we had the same problem but interest is compounded monthly?

PV :
I:
n:
FV?

6. How much would I have in my retirement account if I deposited Rs 2000 each year for 35 years and I ea

PMT :
I:
n:
FVA?
7. Instead, what if I made monthly deposits of Rs 166.67? How about monthly deposits of Rs 333.33?

PMT :
I:
n:
FVA?
withdraw the funds 4 years later. In which account should you place your funds?

10,000.00 12155.0625

10,000.00 12100

Decision

Because account A produces higher future value is preferred. The annual compounding in account A more than

est rate of 7%, If it is compounded annually, then how much money will you have at the end of:-

FV Factor FV
10000 1.07 10700
10000 1.4025517307 14025.517307
10000 1.9671513572896 19671.5135729

pect the value of the property to increase at an annual compound interest rate of 8% over the next 10 years. How much

FV Factor FV
2.1589 863569.9989

my deposit be worth after 5 years?

₹ -100.00
0.1000
 5
₹ 161.05

₹ -100.00
0.0083 10%/12
60 5*12
₹ 164.53 ₹ 164.53

2000 each year for 35 years and I earned 10% on my savings? What about Rs 4,000?

₹ -2,000.00 PMT : ₹ -4,000.00

10.00% I: 10.00%
35 ₹ 542,048.74 n: 35
542048.73696129 FVA?
monthly deposits of Rs 333.33?

₹ -166.67 PMT : ₹ -333.33

0.83% I: 0.83%
420 n: 420
₹ 632,785.66 FVA?

₹ 19,671.51 ₹ 121,665.29 ₹ 18,564.00 ₹ 863,570.00 ₹ 11,183,914.40

₹ 21,589.25 ₹ 127,628.16
₹ 23,673.64 ₹ 133,822.56
nding in account A more than compensates for the higher rate at simple interest in account B

f:-

e next 10 years. How much

 ₹ 1,084,097.47
1084097.473923

₹ 1,265,533.36
5.525631
11051.26