TIME VALUE OF MONEY

FUTURE VALUE:
a) FUTURE VALUE OF A SINGLE CASH FLOW:
1) Mr. Parameshwar deposited ₹50,000 in a growth-oriented mutual fund for a long-term period. The fund could
secure growth of 18% p.a. on average. If he decides to withdraw after the lock- in period of 5 years, how much
money he will get from this investment in future?
b) FUTURE VALUE OF MULTIPLE CASH FLOW:
2) Mr. Raghuram opened a bank account today with ₹1,000. He expects to deposit ₹25,000, 18,000 and 32,000 at
the end of each of the next 3 years respectively. Interest rates are 7.5% compounded annually. How much will he
have in his account in three years? What happens to the amount if he invests the same series of cash flows at the
beginning of the year?
3) Mr.X deposits ₹5000 at the end of 1st year, ₹10,000 at the end of 2nd year , ₹15000 at the end of 3rd year, ₹20,000
at the end of 4th year and ₹25000 at the end of 5th year in saving bank account at the rate of 6%p.a. He wants to
the maturity value at the end of 5th year.

c) FUTURE VALUE OF ANNUITY:

4) Ms. Shakira wants to purchase a house after 5 years for which she has to make a payment of 75 lakhs. How much
should she should invest each year if her savings earn a 12% compound return?
5) A company plans to replace the existing machinery after 10 years at a cost of ₹8,00,000. If the investment fetch
10% rate of compound interest, calculate the amount that should be transferred to the sinking fund at the end of
each year.
6) A joint stock company has the capacity to set daside Rs. 50,000 for the redemption of debentures capacity to set
the amount invested fetches 12% compound interest, calculate the value of debentures the company can issue.
7) Mr. Vasu invest 5000 at the end of every year atYour textofhere
10% rate 1 per annum. State what amount he will receive
interes
at the end of 4 years.
8) A firm requires Rs. 8,00,000, six years from now For this purpose, it is creating a Reserve Fund by transferring
equal annual instalments to this Fund, and investing it in outside securities at 8% compound interest per annum.
Calculate the annuity.
a) if the transfer is made from the end of the current year.
b) if the transfer is made from the beginning of the current year.
9) Ms Preethi invests ₹50,000 in a financial institution at the beginning of each year for the next five years, and the
funds will yield 8.5% compound interest per year. Determine how much money she will have at the end of 3 years.
10) A Recurring Deposit of Rs 25,000 is made every year into the bank for a period of 10 years at 8% interest. What is
the accumulated amount at the end of 10th year?

PRESENT VALUE:

a) PRESENT VALUE OF A SINGLE CASH FLOW:

1) An investor wants to find the present value of ₹40,000 due 3 years His interest rate is 10%?
2) Mr. 'X' wants to have ₹ 60,000, 5 years from now. For this purpose, wants to invest in mutual fund which is
expected to give a compound interest of 12% per annum. Calculate how he showed invest now.
3) Mr.Muniraju is supposed to receive a payment of ₹ 80,000 after 3years. He wants to know the present value of
this future amount if the discount rate is 9% compounded quarterly and annually.

b) PRESENT VALUE OF MULTIPLE CASH FLOW:

4) From the following information, Calculate the present value at 10% interest rate.
 Year 0 1 2 3 4 5

Cash Inflows(₹) 2000 3000 4000 5000 4500 a.

5) Cash inflow of a certain project along with uneven cash flows are given below:

Year 1 2 3 4 5

Cash Inflows(₹) 20,000 30,000 50,000 60,000 50,000

6) The project cost is ₹1,30,000 consider and determine the profitability of the project based on Net Present Value.
Assume the rate of Interest at 10%.
c) PRESENT VALUE OF ANNUITY:
7) A limited borrowed ₹8,00,000 from Canara Bank at a compound interest of 16% per annum. The repayment was
agreed to be by way of 8 equal annual instalment. Calculate the amount of instalment.
8) An author of a book is entitled to a royalty of ₹12,000 a year from the publish for 10 years. Instead, the annual
payment of royalty, the author wants the value of the royalty to be paid in cash immediately. The compound
interest rate is 8% p.a. Calculate the amount of royalty payable by the publisher to the author immediately.
9) A second hand computer is purchased on hire purchase basis by paying 20,000 down and five more annual
instalments of ₹10,000. The instalment included interest at 16% compound interest per annum. Calculate the
cash price of the computer.
10) A company purchase a machines costing ₹1,50,000. The effective life is estimated to be 5 years. Assuming
interest at 8% compound per annum, determine the yearly depreciation amount under annuity method of
depreciation.
11) Mr. X borrows a loan of ₹1,00,000 from Bank of Baroda at 10% per snum. The loan repaynet 00.00 from tank per
instalments paid at the beginning of the yed to be by way of 5 equal payable annually.
12) A depositor deposits in a bank 1,000 at the beginning of every how much depo year for 5 years at an interest of
10% Per annum. Calculate the future value of the annuity at the end of five years.
13) Ravi deposits ₹5,000 at the beginning of every year in to a bank in a recurring deposit account for 6 years at 8%
compound interest Per annum. Calculate compound interest per annum. Calculate the maturity value of the
deposit.
14) Kalpana wants to accumulate ₹ 20,00,000 over a period of 4years. For this, she plans to make equal annual
deposits in the bank at a compound interest of 10% at the beginning of each year. Calculate how much deposit
per year.
15) Mr. Vedav has to receive ₹3000 at the beginning of each year for five years. Determine the present value of the
annuity due assuming a 12% interest rate.

DOUBLING PERIOD: (Rule 72 & 69)

16) Mr.Narahari deposited ₹ 1,50,000 today at 7.5% interest rate in SBI fixed deposit. He is interested in knowing if
he keeps this money in FD, after how many years his investment will get doubled? You are requested to apply
(a)Rule 69 and (b) Rule 72 for computational purpose.
17) Ms.Dejamma has invested ₹ 10,000 on the first day of the month in a mutual fund for a period of 6 months. At
the time of maturity, she received a sum of 14000 yielding a return of 80%p.a. She is interested in knowing after
how many months, the amount invested by her would have doubled considering all the factors in which the
business operates remain unchanged as it was earlier.
18) If an investor deposit ₹ 5000 today at 10% rate of Interest, in how many years will this amount double?