6.
Deposit amount in Rs. 1000 [Link] years of deposit
Interest rate 8% 10% 12%
Value of the deposit after 5 years 1,469 1,611 1,762
6.2
Amount of deposit today Rs. 1,000,000
Maturity amount Rs. 160,000
Interest rate 12%
Doubling period in years 6
[Link] doubling periods required to reach the maturity amount -2.6438561897747
[Link] years needed to get the maturity amount -15.863137138648
6.3
Amount of deposit today Rs. 1000
Perod of deposit (in years) 12
Amount promised at the end of the period. Rs. 8,000
[Link] doubling periods required to reach the promised amount 3
Doubling period in years 4
Interest rate in percentage terms as per the rule of 72 18
6.4
First period of savings ( in years) 5
Amount of savings at the end of each year during the first
period Rs. 2,000
Second period of savings ( in years)commencing from the end
of the first period 10
Amount of savings at the end of each year during the second
period Rs. 1,000
Rate of interest on the savings 10%
Ammout of accumulated savings at the end of the second
period Rs. 79,482
6.5
[Link] years after which the higher studies begin 8
Amount needed for the studies at the time of joining Rs. 1,000,000
Interest rate on the savings 12%
Annual savings required to accumulate the needed amount Rs. 81,303
6.6
Perod of deposit ( in years) 6
Amount to be deposited at the end of each year Rs. 1,000
Amount promised to be paid at the end of the period Rs. 10,000
Interest rate implicit in the offer 20.28%
6.7
Amount to be paid today Rs. 1,000
Amount promised to be repaid after the period Rs. 5,000
Length of the period ( in years) 10
Rate of interest implicit in the offer 17.46%
6.8
[Link] years after which the amount will be received 8
Amount of receipt Rs. 10,000
If the interest rate is 10.00% 12% 15%
Present value of the receipt 4,665 4,039 3,269
6.9
Period of the annuity( in years) 5
Amount of the annuity Rs. 2,000
Rate of interest 10%
Present value of the annuity Rs. 7,582
6. 10
First choice
Life expectancy ( in years) 15
Amount of annual pension during the life time Rs. 10,000
Rate of interest 15%
Present value of the pension as per the first choice Rs. 58,474
Present value of the pension as per the second choice Rs. 50,000
The first choice is the better one as its present value is higher
6. 11
Amount of deposit Rs. 100,000
Interest payable on the deposit 10%
Period of deposit (in years) 30
Balance to be left in deposit at the end of the withdrawal
period Rs. 0
Equal amounts withdrawable at the end of each year Rs. 10,608
6.12
Length of the first period ( in years) 1
Amount to be received at the end of the first period Rs. 1,000
Length of the second period ( in years) commencing from the
end of the first period 1
Amount to be received at the end of the second period Rs. 2,500
Length of the third period ( in years) commencing from the
end of the second period 8
Amount to be received at the end of each of the third period
Rs. 5,000
Rate of discount 12%
Present value of the income stream Rs. 22,687
6.13
Length of the first period ( in years) 5
Amount to be received at the end of each of the first period
Rs. 1,000
Length of the following period ( in years) infinity
Amount to be received at the end of each of the infinite
period Rs. 3,000
Rate of discount 10%
Present value of the income stream 26,209
6.14
Annual income to be received from the end of year 10
Amount of annual income for ever Rs. 5,000
No. of years for which the annual income to be received 15
Rate of discount 10%
Amount to be deposited today to earn that income 21,205
6.15
Amount of deposit to be made Rs. 20,000
Annual amounts of repayment from the end of the first year
Rs. 4,000
No. of years of repayment 10
Interest earned on the deposit 15.10%
6.16
Discount rate 12%
End of year Stream A Stream B Stream C
1 100 1000 500
2 200 900 500
3 300 800 500
4 400 700 500
5 500 600 500
6 600 500 500
7 700 400 500
8 800 300 500
9 900 200 500
10 1000 100 500
Present value 2,590.4 3,624.8 2,825.1
6.17
Amount of deposit Rs. 10,000
Rate of interest 16%
No. of times compounding is done in an year 4
Period of deposit ( in years) 5
Amount to which the deposit will grow Rs. 21,911
6.18
Amount of deposit Rs. 5,000
Period of deposit ( in years) 5
Rate of interest 12%
No. of times compounding is done in an year 4
Maturity value of the deposit Rs. 9,031
6.19
A B C
Stated rate 12% 24% 24%
Frequency of compounding (times) 6 4 12
Effective rate 12.6% 26.2% 26.8%
Difference between the effective rate and the stated rate 0.6% 2.2% 2.8%
6.2
Income stream to commence from the beginning of year 10
Annual income forever Rs. 12,000
Rate of interest 12%
Amount of investment required now Rs. 40,388
6.21
The amount to be received now according to the first choice
Rs. 5,000
The amount to be received according to the second choice
Rs. 20,000
Period in which the amount would be received according to the
second choice (in years) 10
Implied interest rate of the second choice, if it were equivalent
to
Asthe
thefirst interest rate is much above the usual bank term deposit14.87%
choice
implied rate, I will
prefer that choice
6.22
Amount deposited now Rs. 10,000
Period of deposit ( in years) 10
Rate of interest 10%
Frequency of compoundig in an year 2
Maturity value of the deposit Rs. 26,533
Inflation rate 8%
Maturity value of the depost for the same period , taking into
account the inflation rate Rs. 12,290
6.23
Period of deposit (in years) 10
Maturity amount required at the end of the period Rs. 50,000
Interest rate 12%
Amount of equal annual deposits needed each year at the
beginning of an year Rs. 2,544
6.24
Period of annual receipt from the beginning of year 2025
to the beginning of year 2029
Amount of each annual receipt Rs. 20,000
Period of annual deposit from the end of year 2015
to the end of year 2020
Interest rate 12%
Amount of each deposit Rs. 6,323.42
6.25
[Link] years after which the first receipt occurs 10
Amount of each receipt at the end of each year Rs. 2,000
[Link] annual receipts 30
Discount rate 10%
Present value of the receipts Rs 7,996
6.26
Period after which the pension is receivable (in years) 5
Amount of pension per month Rs 6,000
No. of years for which pension will be received 15
Interest on loan 12%
Loan instalment as a proportion of the pension amount 30%
Amount that can be borrowed now Rs. 85,102
6.27
Bank loan amount Rs. 60,000
Instalment amount Rs. 3,000
[Link] instalments 24
Period of each instalment (in years) 1/12
Interest rate charged by the bank per month 1.51%
6.28
Amount of debentures to be retired each year Rs. 500,000
Annual debentures retirement to commence from the end of
year 10
Annual debentures retirement to end on year 10%
Equal annual deposits in a sinking fund for the next (years) 10
Interest rate 8%
Annual deposit needed in the sinking fund Rs. -458,344
6.29
Amount deposited in the bank Rs. 1,000,000
Amount to be withdrawn at the end of each year Rs. 200,000
Interest rate 10%
[Link] years in which the entire amount can be withdrawn 7.3
6 .30
Interest rate 14%
Loan amortisation schedule
Annual
Year Beginning amount instalment Interest
1 500,000 171,602 70000
2 398,398 171,602 55775.67
3 282,571 171,602 39559.92
4 150,528 171,602 21073.98
6.31
Loan amount Rs. 1,250,000
Equal annual instalment Rs. 203,432
Interest rate 10%
maturity period of the loan (in years) 10.00
6.32
Quantity of iron ore to be mined (in tons) 100,000
Period of mining ( in years) 15
Expected price per ton at the end of year 1 Rs. 3,000
Increase in price per year 6%
Discount rate 16%
Present value of the iron ore that can be mined Rs. 2,224,039,891
6.33
Interest rate 10%
Choice a: Amount receivable now Rs. 500,000
Choice b: Amount receivable Rs. 1,000,000
Period in which the amount is receivable (in years) 6
Present value of the choice b 564,474
Choice c: Amount receivable annually for ever Rs. 60,000
Present value of the choice c Rs. 600,000
Choice d: Amount receivable annually Rs. 100,000
Period in years for which the amount would be received 10
Present value of the choice d Rs. 614,457
Choice e: Amount receivable after one year Rs. 35,000
Increase in the amount receivable every year for ever 5%
Present value of the choice e Rs. 700,000
Choice e has the highest present value of Rs.70,000
6.34
Income(net) that will be generated in the coming year Rs. 120,000,000
Increase in cash flows per year -3%
Discount rate 12%
a. Period of use of the pipeline infinity
Present value of the cash flows Rs. 800,000,000
b. Period of use of the pipeline( in years) 25
Present value of the cash flows Rs. 778,024,803
6.35
Oil production in an year ( in barrels) 50,000
Period of production of the oil (in years) 15
Increase in oil production per year -5%
Increase in oil prices per year 3%
Current price of the oil per barrel $ 50
Discount rate 10%
Growth rate in the value of the oil produced -2.15%
Present value of the oil production $ 16,654,807
6.36
Oil production in an year ( in barrels) 80,000
Period of production of the oil (in years) 20
Increase in oil production per year -6%
Increase in oil prices per year 4%
Current price of the oil per barrel $ 60
Discount rate 12%
Growth rate in the value of the oil produced -2.24%
Present value of the oil production $ 30,781,329
6.37
Amount saved last year Rs 100,000
Increase in annual savings expected per year 8%
Further period of savings( in years) 20
Interest rate on investment of savings 9%
Amount of savings at the end of the savings period Rs. 9,434,536
6.38
No of weeks in an year (assumed) 52
Interest rate on deposit offered by the bank 8%
Frequency of compounding in an year 52
Effective interest rate 8.32%
Investment today 5,000
Interest rate 9%
No. of years of investment 75
Future value 3,205,954.47
Solved problem 6.2
Interest rate in percentage 12
Doubling period as per rule of
72 6
69 6.1
Solved problem 6.3
Nominal rate of interest 16%
No. of compoundings in a year 4
Effective rate of interest 17%
Solved problem 6.4
No. of annual deposits 15
Amount of each deposit 5,000
Rate of interest per annum 14%
Total period of deposit in years 15
Future value of the annuity 219,212
Solved problem 6.5
Period of deposit in years 5
Amount of annual deposit 6,000
Lumpsum payment at the end 44,650
Implicit interest rate 20%
Solved problem 6.6
Future value 1,000,000
Period 60
Discount rate 10%
Present value 3,284
Solved problem 6.7
No. of annuity payments 12
Amount of annuity payment 10,000
No. of years at the end of which the first annuity payment
occurs 8
Discount rate 14%
Value of the annuity at the end of the year
7 56,603
Present value of the annuity 22,621
Solved problem 6.8
Discount rate 14%
Year 0 1 2
Cash flow 5,000 6,000 8,000
Present value 27,230
Solved problem 6.9
Amount of deposit 200,000
Interest rate 10%
[Link] annual withdrawals 15
Amount of each withdrawal 26,295
Solved problem 6.10
Cost of the tour 1,000,000
Amount of annual savings 80,000
Rate of interest per annum on savings 14%
No. of years of waiting 7.72
Solved problem 6.11
Amount of borrowal 80,000
Monthly interest rate 1.25%
No. of monthly instalments 12
Monthly instalment amount 7,221
Loan amortisation schedule
Monthly
Month Beginning amount instalment Interest
1 80,000 7,221 1000
2 73,779 7,221 922.2
3 67,481 7,221 843.5
4 61,104 7,221 763.8
5 54,647 7,221 683.1
6 48,109 7,221 601.4
7 41,490 7,221 518.6
8 34,788 7,221 434.8
9 28,002 7,221 350.0
10 21,132 7,221 264.1
11 14,175 7,221 177.2
12 7,132 7,221 89.1
5
15%
2,011 FV
PV
NPER
₹ 385,543.29 RATE
1000
10000
20%
-100%
90000
Err:523
₹ -331,212.68
10.45%
10%
0.104486101 10.45%
₹ -27,018.25
10.450%
₹ -10,000.00
₹ 1,659.05 7.2
₹ -27,018.30 10%
3.32192809
23.9178823
₹ 97,729.41
Principal Remaining
repayment balance
101,602 398,398
115,827 282,571
132,042 150,528
150,528 0
3 4
9,000 8,000
Principal Remaining
repayment balance
6,221 73,779
6,298 67,481
6,377 61,104
6,457 54,647
6,538 48,109
6,619 41,490
6,702 34,788
6,786 28,002
6,871 21,132
6,957 14,175
7,043 7,132
7,132 0