TVM

• 1. Analyse the given info.

- PV/ FV/ PMT?
- No of year, n?
- Interest rate, i?
- Compounding, m? (If it is not compounded annually, make
adjustments to your n and i. Also adjust PMT if applicable.)
- For example, you deposit RM 5000 into your savings account today.
How much it will be after 3 years? i= 12%, compounded monthly.
- m=12, so adjust your n by multiplying with the m, whereas i needs to
be divided by m. New n = 3 x 12 = 36, new i = 12 / 12 = 1%
• 2. Lump sum involves or Regular payments involve?
• - If lump sum or single pmt, use normal pv or fv formulas/ tables will
do.
• - If involves regular payments, use annuity formulas / tables.
Calculate PV (single payment)
Calculate FV (single payment)
Calculate PV (ANNUITY)
Calculate FV (ANNUITY)
Question
Peter had borrowed RM45,000 from the bank at 8%
compounded annually to purchase a new machine. The
loan is to be repaid in equal annual installments at the
end of each year over the next five years.

Calculate the annual installment payment for the loan.

Answer
PV = PMT (PVIFA i,,n)
RM45,000 = PMT (PVIFA; 8%, 5)
PMT= RM11,270.54
Question
Rachel would like to accumulate RM500,000 in her investment account
20 years from now for her retirement. If she can earn an interest of
15% per annum on the investment, determine how much must Rachel
deposit today.
Answer
• RM 30550