AMITY Amity Business School NIVERSITY QL. What would be the total value of $5000 invested now? i After3 yrs if therate of interestis 20% ii, After 4 Yrs . if therate of interest is 15% iti, After 3 yrs, if therate of interestis 6% Q2. What will be the balance in the accountif $1500 is deposited today and allowed tocompound for 20yrs @ 8% (compounded annually)? How much interest will be eamed on the otiginal deposit? Q3. How much will investorneed in 20yrs to have the same purchasing power that $100 has todayif inflation averages 2% per year. Q4. Mr York wants toplan an excursion after five year and for the same he opens a5 yrs recurring deposit account with SBI who is offering 8% interest on the deposit. Me. York decided to deposit$10000 per annum. How much can he expect atthe end of 5 yrsassuming (@ each depositis made at the end of the each year at the beginning of the year amity Amity Business Schoo! Q5. How much will a recurring investment of Rs10,000 per annum accumulate to at the end of 30 yrs where the investment fetches an interest rate of 9% per annum. Q6. If you need Rs40,000 after Syrs at 12% , what amount should you invest today? Q7. Find out the present value of an investment which is expected to give a return of Rs.2500p.a indefinitely and the rate of interest is 12% p.a. QS. An investment company makes an offer to deposit a sum of Rs.1100and, then receive a return of Rs.80p.a. perpetually. Should this offer be accepted if the rate of interest is 8%. Will the decision change if the rate of interest is 5%. Q9. A machine is costing Rs.950000 and its effective life is estimated at 12yrs. ‘What should be retained out of profit at the end of each year to accumulate at compound interest rate at 5%p.a. so that a new machine can be purchased after 12yrs. Assume that there is no appreciation in the cost of the machine.BaMiy Amity Business School Q10. A finance company offers a scheme called “Lakhpati in 10 years” It has Promised to pay Rs.100000 after 10 years for every Rs.20000 deposited today. ‘The advertisement states that the firm pays Rs 30000 as interest at Rs.8000 every year ‘And therefore offers 407 annual retumns, Do you agree with the claim made in the Scheme? Explain what would be the maturity value ifthe company really had to offer 40% returns annually. ‘[Link] you have Rs.120000 today [Link] to preserve it for next 8 years, ‘When you are required to pay fees for vour sibling, which is estimated to be 1Rs.400000 At what rate should you invest this money to have required sum at the end of 8 years, Tfyou need Rs.400000 after 8 years at 199 what amount should you invest today AMITY Amity Business Schoo! ;NIVERSIY Q.12. ZEE Ltdis borrowing Rs.50 Lakhs for aperiod of 4 years at interest of 15% Repayable in equal installments’ at the end of each year Find out theinstalment Amount, the interestpaid each year & the principle repayment each year. Q13. The current rate of interest on home offered bya commercial bank is 11% p.a. Loan is available for amaximum period of 20 yrs. Rohit is planning to buya property That will costhim Rs.52 lakhs. Bank can finance up to amaximum of 85% of the Value of property, the remaining 15% has to be paid upfront by thepurchaserto the Builder before the loan is approved by the bank. Asper the term of sale, the buyerof Property can get a cash discount of 10% of the value of the property. Rohit can manage 15% of the initial deposit to be made tothe builder from his past saving. He is not sure about the EMIs that he will haveto payin casehe takes theloan Repayable in 10 yrs. Calculate EMI and segragate the EMI into interest and the principal.AMITY it AMITY Amity Business School Qi4-You can saveRs.5,000 a year for 3 years. and Rs.7,000 a year for 7 years thereafter. What will these savings cumulate to at the end of 10 years, if the rate of interestis § percent? QI5. How much shouldPeter save cach year, if he wishes to purchase a flat expected to costRs.80 lacs after § years, if the investment option, available to him offers arate of interest at 9 percent? Assume that the investment is to be made in equal amounts at the end of each year. QI6. Afinance company advertises thatit will pay a lump cum of Rs.100,000 at the endof 15 years to investors who deposit an annual amount of Rs.12,000 . Whatinterestrate is implicit in this offer? QI7. A leading bank has chosen you as the winner af its quiz competition and asked you te choose from one of thefollawing altematives for the Prize: (a) Rs. 60,000 in cashimmediately or (b) an annual payment of Rs 10.000 for thenest 10 years. If the interest rate vou can look forward to for a safe investment is 9 percent. which option would youchaose? ee AMITY UNIVERSITY Amity Business School QI8Ksishna saves Rs24,000 ayearfor 5 years, andRs.30,000 a-yearfor 15 years thereafter If the rate of interest is 9 percent compounded annually. what will be the value of his savings at the end of 20 years? [Link] is the present value of an income stream which provides Rs.30,000 at the endof year one, Rs.50,000 at the endof year three , andRs.100,000 atthe end of four, if the discount rateis 9 percent? ([Link] is the difference between the effective rate of interest and stated rate of interestin the following cases: Case 4: Stated rate of interestis 8 percent and the frequency of compoundingis six times a year. Case B: Statedrate of interestis 10 percent andthe frequency of compoundingis four times a year Case C: Stated sate of interest is 12 percent and thesrequency of compounding is twelve times a year.AMITY Amity Business School UNIVERSITY Q21. You plan to go abroadfor higher studies after working for the next five years and understand that an amount of Rs.2,000,000 will be neededfor this purpose at ‘that time. You have decidedto accumulate this amount by investing. fixed amount at the endof each year ina safe scheme offering a rate of interest at 10 percent. What amount should you invest every year to achieve the target amount? Mini Case, Allen needs your help in his cotrement planning. He is 50 years old and would like to retire atthe age OF S5yza, He cotimates that post retirement he nould need an annuity of 512000 (per annum for the ment 30-year: to mecthis living expenses. The ante of return on his investment portfolio is expected to he 8 per cent per annum. ‘you are requiced to determine the retirement corpus needed to provide hima aa anmuity of 512000 per annum for 30 years 20 that at the end of annuity period his corpus is completely ‘eshausted Assume that the anauity needed in the beginning of the year “Also calculate how much should he invest each year to reach the target setirement corpus? Assuming that the anvestmeat are made at the end of each year. Amity Business School @[Link] promises to give you Rs.5,000,000 after 6 years in exchange for Rs.2,000,000 today. Whatinterest rate is implicit in this offer? Q23. What is the present value of a income stream which provides Rs.1,000 a year for the first three years and Rs.5,000 a year forever thereafter, if the discount sate is 12 percent? Q24, Whats the present value of an income stream which provides Rs.20,000 a year for the first 10 years and Rs.30,000 a year forever thereafter, if the discount rate is 14 percent? Q25. Mr. Ganapati will retire from service in five years How much should he deposit now to eam an annual income of Rs.240,000 forever beginning from the endof 6 years from now ? The deposit eams 12 percent per yearBaMiry Amity Businons Shook UNIVERSITY Q06. Whatis the present value of thefollowing cashflow streams? End of year Siream Sema Z r 300 600 2 550 600 3 600 600 4 680 600 5 700 600 6 750 600 The discount rate is 18 percent. Q27. A bank pays interest at 5 percent on US dollar deposits, compounded once in every six months. What will be the maturity value of a deposit of US dollars 15,000 for three years? Q28. Your ate taking a loan of Rs 1,000,000, camying an interest rate of 15 percent. The loan will be amortized in five equal instalments. Prepare Loan Amortization schedule for 1¥ three years? 40