TIME VALUE OF MONEY

1. Mr. X deposited Rs. 10,000 in Fixed Deposit at an interest rate of 10%

p.a. compounded annually for 3 years. Calculate maturity value after 3
years.
2. P.V. = Rs. 15,000
ROI = 12% p.a. compounded quarterly
n = 5 years
Find F.V.
3. Mr. Y invested a fixed sum of Rs. 1,000 at an annual interest rate of 10%
at the end of each year for 5 consecutive years. Find the future
compounded value of annuity.
4. Mr. Y invested a fixed sum of Rs. 1,000 at an annual interest rate of 10%
at the beginning of each year for 5 consecutive years. Find the future
compounded value of annuity.
5. Mr. Modi wants to know the P.V. of Rs. 5,000 at an interest rate of 10%
receivable at the end of 3 years and discounting is done half yearly.
6. Find the present value of annuity of Rs. 2,000 received at the end of
each year of the project life say 5 years. Take discount rate of 8%.
7. If an investment yields a sum of Rs. 800 p.a. till perpetuity, find out the
P.V. if discount value is 8% and growth rate is 3%.
8. Rs. 5,000 is invested in a Term Deposit Scheme that fetches interest 6%
p.a. compounded quarterly. What will the interest after 1 year? What is
the effective rate of interest?
9. Mr. Singh is required to pay 4 equal annual payments of Rs. 4000 each in
his deposit account that pays 10% p.a. interest. Find out the future value
of annuity at the end of 4 years.
10. TCS Ltd. offers a fixed deposit scheme whereby Rs. 10,000 matures to
Rs. 12,625 after 2 years, on a half-yearly compounding basis. If the
company wishes to amend the scheme by compounding interest every
quarter, what will be the revised maturity value?
11. A doctor is planning to buy an X-Ray machine for his hospital. He has two
options. He can either purchase it by making cash payment of Rs.
5,00,000 or Rs. 6,15,000 is to be paid in 6 equal annual instalments. Which
option do you suggest to the doctor assuming that the rate of return is
12%? Present Value of annuity of Re. 1 at 12% discount rate for 6 years is
4.111.
12. Rahul invested Rs. 2,40,000 at 10% p.a. What is the amount after 3 years
if the compounding is done?
a. Annually
b. Semi-annually
13. Rajesh wants Rs. 1,00,000 – 3 years from now and if the bank pays
interest of –
a. 10% p.a. compounded annually
b. 10% p.a. compounded semi-annually
c. 10% p.a. compounded quarterly

Find how much money should he invest now?

14. If a person deposits Rs. 5,000 at the end of each year in a bank for 10
years, what should be the accumulated deposit at the end of 10 years if
the interest rate is 8% p.a.?
15. Mr. Vimal is 50 years old and he is expecting that he will live for another
10 years. His total savings is Rs. 2,00,000 which he deposited in a bank.
He wants to spend his savings equally over these 10 years. If the interest
earned on these deposits is 10% p.a., what is the annual withdrawal made
over the defined period such that the account balance becomes zero at
the end of 10 years?
16. Ascertain the compound value and compound interest of an amount Rs.
75,000 at 8% p.a. for 3 years.
17. Suzuki Ltd. is offering free credit on a new car of Rs. 10,000. You pay Rs.
1,000 down and then Rs. 300 a month for the next 30 months. Tata
Motors Ltd. does not offer free credit but will give you Rs. 1,000 off the
list price. If the interest rate is 10% p.a. which company is offering the
best deal?