ENGINEERING ECONOMICS

Niswan Dhakal
Lecturer
MTU School of Engineering
 “Unnecessary cost is not what is saved at the beginning of the project through value
engineering but rather what is spent in excess of the initial bid price to fix later”- John
Murray

01/18/2026 Er. Niswan Dhakal (MTU) 2

 INTRODUCTION
• Value engineering is the systematic method to improve the value of a
product or project by analyzing the function of each component and
considering alternative solutions that may be more cost effective or
efficient. It focuses on maximizing the value received by the
customer(utility) while minimizing the overall cost.

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 CHAPTER TWO

VALUE ENGINEERING

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 What ARE ITS FUNCTIONS?
• Cost Reduction
• Improved Performance
• Increased Customer Satisfaction
• Innovation and Creativity
• Improved Communication and Collaboration

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 Aims of Value Engineering
• Enhance Value
• Reduce Costs
• Improve functionality
• Promote Innovation
• Ensure Customer Satisfaction
• Improve Communication and Collaboration

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 Value Engineering Procedure

Information Functional Idea Implementat

Evaluation Development Presentation
Gathering Analysis Generation ion

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 Time Value of Money
• Time value of money is defined as the time- dependent value of
money stemming both from changes in purchasing power of money
(inflation or deflation) and from the real earning potential of alternative
investments over time.
• Since money has the ability to earn interest, its value increases with time.
• Hence it is the relationship between interest and time.
 Cost of Money
• In the financial world, money itself is a commodity, and like other goods
that are bought and sold, money costs money.
• The cost of money is measured by an interest rate, a percentage that is
periodically applied and added to an amount of money over a specified
length of time.

01/18/2026 9
 Cost of Money
• Should we buy something today or save money and buy it later?
• You have Rs 2,000 now and a stand fan costs Rs 2,000. Would it be
financially right to purchase now if the market interest is 4% and the
inflation rate is 6%?
• Money has economic value on the basis of time when it is received.
Because it has earning and purchasing power over time.

01/18/2026 10
 Cash Flow Diagrams
• Problems involving the time value of money can be conveniently
represented in graphic form with a cash flow diagram.
– Upward arrows represent positive flows (receipts) and downward
arrows – negative flows (disbursements).
– Arrows actually represent net cash flows.

01/18/2026 11
 Cash Flow Diagrams
• End –of- period Convention
– Actually, cash flows can occur at the beginning, or end of the period
or in the middle.
– Usually, we consider the cash flows take place at the end of the period.

01/18/2026 12
 Interest
 the fee that is charged for use of someone else’s money.
 the size of the fee will depend upon the total amount of money
borrowed and the length of time over which it is borrowed.
 Cash Flow Diagrams
• Simple and Compound Interests
– If interest is earned on the principal amount only and not on the
interest amount incurred, then it is called simple interest.
– If interest amount is earned on both principal and interest amounts in
the course of time, then it is called compound interest.

01/18/2026 14
 Calculation of interest
Simple Interest
Under simple interest, the interest earned during each interest period
will not earn an additional interest on interest amount in the remaining
periods.
I = (iP)N
F =P +I =P(1+iN)

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 Compound Interest
Under this interest, the interest earned in each period is based on the total
amount owed at the end of the previous period. This means interest will
be earned on the interest charged in the previous period as well.
At the end of first year
F =P+iP =P(1+i)
At the end of 2nd year
F = P(1+i) + i[P(1+i)]
= P(1+i)2
A the end of n periods, F = P(1+i)n

01/18/2026 16
 Time Value of money
• Some Notations
– An = Discrete payment or receipt at the end of interest period
– i= interest rate per interest period
– N= number of interest periods
– P= A sum of money at a time chosen for analysis, or called present value (PV)
or present worth
– F= A future some of money at the end of analysis period, or Fn ,at the end of
some interest period
•
01/18/2026 17
 Time Value of money
• A = An end- of -period payment or receipt in a uniform series
• Vn = An equivalent some of money at the end of specified period,
considering time value of money; V0 =P ; Vn = F

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• As an example of how the elements we have just defined are used in a
particular situation, let us suppose that you apply for an education loan
in the amount of Rs. 3,00,000 from a bank at a 9% annual interest rate.
In addition, you pay a Rs. 3000 loan origination fee when the loan
commences. The bank offers two repayment plans, one with equal
payments made at the end of every year for the next five years
(installment plan) and the other with a single payment made after the
loan period of five years (deferment plan).

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End of yeat Receipts Payments
Plan 1 Plan 2
Year 0 Rs. 3,00,000 Rs, 3000 Rs. 3000
Year 1 Rs. 77,127.77 0
Year 2 Rs. 77,127.77 0
Year 3 Rs. 77,127.77 0
Year 4 Rs. 77,127.77 0
Year 5 Rs. 77,127.77 Rs. 4,61,587.20

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 Time Value of money
Cash flow Diagrams
It is a convenient way of representing problems involving time value of
money in graphic forms.

1 2 3 4 5 6
F

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 Time Value of money
2
1 7

The cash flow diagram shows net flows at the end of

interest periods.

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 Cash Flow Diagrams
• Economic Equivalence
– Economic equivalence exists between cash flows that have the same economic
effect and could therefore be traded for one another in the financial market
place.
– If money is given or taken now and if it has to be received or paid in future, then
the process is called compounding process.
– If future cash flows are to be brought to the present time, then it is called
discounting process.

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 Five Types of Cash Flows

– Single Cash flow

– Irregular Cash flow series
– Equal (uniform) series
– Linear Gradient series
– Geometric Gradient Series

01/18/2026 24
 Single Cash flow
• F =P(1+i)N =P(F/P,i,N)
where, (1+i)N is called single payment compound amount factor.
• P =F(1+i)-N=F(P/F,i,N)
where, (1+i)-N is called single payment present value (worth) factor.

01/18/2026 25
 Equal (uniform) series
• F =A[(1+i)N –1] /i =A(F/A,i,N)
where [(1+i)N –1]/i is called equal payment series compound amount
factor or uniform series compound amount factor.
• A = F*i/ [(1+i)N –1] =F(A/F,i,N)
where i/ [(1+i)N –1] is called equal payment series sinking –fund factor.

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 Equal (uniform) series
• Capital Recovery factor(Annuity Factor)
– A =P*i(1+i)N / [(1+i)N –1] =P(A/P,i,N)
where i(1+i)N / [(1+i)N –1] is called equal payment series capital recovery
factor or annuity factor.
– P =A [(1+i)N –1] / i(1+i)N =A (P/A, i,N)
Where [(1+i)N –1] / i(1+i)N is called equal payment series present value (worth)
factor.

01/18/2026 27
 Present Value of Perpetuities
• A perpetuity is a stream of cash flows that continues forever. A good
example is a share of preferred stock that pays a fixed cash dividend
each period (usually a quarter of a year) and never matures. An
interesting feature of any perpetual annuity is that you cannot compute
the future value of its cash flows because it is infinite. However, it has a
well-defined present value. It appears counterintuitive that a series of
cash flows that lasts forever can have a finite value today.
P=A[(1+i)N−1i(1+i)N]=A(P/A, i, N).

P=A/i.
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 Linear Gradient series
• Gradient series is to be taken as composite series, or as a set of two
cash flows – one as uniform series and another as gradient series.
– P =P1+ P2
– P2 =G [(1+i)N –iN-1]/ i2(1+i)N =G(P/G,i,N)
where (P/G,i,N) is called gradient series present value (worth) factor.

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 Linear Gradient series
• A = G [(1+i)N –iN-1]/ i[(1+i)N –1] =G(A/G,i,N)
where (A/G,i,N) is called Gradient to equal payment series conversion
factor.

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 Geometric Gradient Series
• Many engineering economic problems involve cash flows that increase
or decrease over time by a constant percentage (geometric).
• P =A1[1-(1+g)N (1+i)-N ]/(i-g) if i=g
=N A1/(1+i) if i =g
= A1(P/ A1,g,i,N)
Where (P/ A1,g,i,N) is called geometric gradient series present value (worth)
factor.

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 Geometric Gradient Series
• F = A1[(1+i)N - (1+g) N ]/(i-g) if i#g
=N A1/(1+i)N-1 if i=g
= A1(F/ A1,g,i,N)
Where (F/ A1,g,i,N) is called future value (worth) equivalent of
geometric gradient series.

01/18/2026 32
Factor: What is Factor?

A factor is defined as the parameter that establishes

an equivalence between two cash flows or among
several Cash flows
 Factor: Type

• Single Payment Factors

– Single Payment Compound Amount Factor
– Single Payment Present Worth Factor
• Uniform Series Present Worth Factor
• Capital Recovery Factors
• Sinking Fund Factor
• Uniform Series Compound Amount Factor
Single Payment Factor
P = Given
i
given n-1 Year
n
0 1 2

F
?
 Single Payment Factor

F1 = P + Pi = P 1 + i 
F2 = F1 + F1 i = F1 1 + i= P 1 +
2

i 
......................................................
......................................................
F/P = 1 +
Fn = ....................... = P 1 + i

i
n
 n
P =
Single payment
compound amount
Given i
n-1 SPCAF
Year
factor given n
0 2
1
Functionally, F = P (F/P, i%, N) F
Single Payment Factor
i
n-1 Year
P given n
0 1 2
=?
F
Given

Single Payment
1
Present Worth P/F = n
Factor
1 +
Functionally, P = F(P/F, i%, N)
 Single Payment Factor
Summary
 Example
You have just purchased 100 shares of
Hathway Investment Nepal Ltd. stock at
Rs. 60 per share. You will sell the stock
when its market price has doubled. If you
expect the stock price to increase 20% per
year, how long do you expect to wait
before selling the stock?
 Rs. 12,000
1 2 3 N-1 N

Rs. 6000

Given : P = Rs. 6,000, F = Rs. 12,000, i= 20%

Using Single Payment Compound Factor F = P (F/P, 20%, N) = P (1+i)N
Rs. 12,000 = Rs. 6,000 (1+0.2)N
2 = (1.2)N
Taking log on both sides Log 2 = N log 1.20
N = Log 2
Log 1.20
= 3.80 = 4 years (approximately)
 RULE OF 72
This rule can determine approximately how
long it will take for a sum money to
“Double”. This rule states that
“to find the time it takes for the present
sum of money to grow by a factor 2, we
divide 72 by the interest rate”
From the previous example
72/20 = 3.60 =4 years (approximately)
 Example
# F1 Soft (owner of e-sewa) Technology a growing Tech shop,
wish to set aside money now to invest over the next 4 years
in automating its customers service department. The
company can earn 10% on a lump sump deposited now and
it wishes to withdraw the money in the following increment.
Year 1: Rs. 250,0000 to purchase a computer and
database software.
Year 2: Rs. 300,000 to purchase additional
hardware. Year 3: No expenses
Year 4: Rs. 500,000 to purchase software
upgrades.

How much money must be deposited now to cover anticipated

 Rs. Rs.
25,000 5,000
Rs.
3,000
0
1 2 3 4
P = P1+P2+P4

P = P1+ P2+ P4
P = Rs. 250,000(P/F,10%1) + Rs. 30,000(
P/F,10%, 2) +
Rs. 50,000(P/F,
10%, 4) P = Rs.
286,220.
P? Uniform Series Present Worth Factor

1
i
2 3 5 6 n-1 n Year
0 4 given

A=
Given
 Uniform Series Present Worth Factor
 1   1   1 
P=A +A + ... + A 
1  2 
n

1 + i  1 + i 1 + i 


 
1 + in - 1  1 + i n - 
P=A n   P/A   n
 
 i 1 + 1  i 1 + i


Functionally, P = A (P/A, i%,
i 
N)
 Capital Recovery Factor

P  Given
1
i  given6 n- n Year
0 2 3 4 5 1

A
 =? 
 i 1 +  i 1 + i 
A=P n   A/P   n

n1 + i - 1 n1 + i 

i 
Functionally, A = P (A/P, i%, N)
- 1
Summary
Capital Recovery Factor
Sinking Fund Factor F = Given
i
1 2 3 given
5 6 n- n
0 1 Year
4

A
=?

Sinking fund is an interest bearing account into which a fixed sum is

deposited in each interest period.
  i 1 + i
Sinking Fund Factor 
A=P 
 n n

 1 + i  -
 1 
1    i 1 + i 

=F n n

 1 + i  n  
  
i

=F 1 + i n - 1 
 1 + i  -
Functionally, A = F (A/F, i%, N)
Uniform Series Compound Amount Factor
F= ?

i  given
1 5 6 n- n
2 3
0 1 Year
4

A=
Given
F  A 1 + i  - 1
 n

 i 
 
Functionally, F = A (F/A, i%,
N)
 Summary
F/A & A/F Factors: Notation and Equations
 Uniform Series Compound Amount Factor
F/A & A/F Factors: Notation and
Factor
Equations Formula
Facto Excel
Notatio Find/Given Function
r
n
Name
F/A, i,n
Standard Notations
Equation

F/A, Uniform Series FV(i%,n, A)

Compound
i,n amount
Sinking PMT(i%,n, ,
A/F, i,n Fund F)
A/F A = F A/F,
F/A i,n F = A
 Example

Example: An engineering technology group

just purchased New Cad software for Rs.
5000 now and annual payments of Rs. 500 Per
year for 6 years starting 3 years from now for
Annual Upgrades. What is the present worth
of the payments if the interest Rate is 8% per
year?
Cash Flow Diagram
PT
? P i
A

PA' ? ? 3 8% 5 6 7 8 Year
0 4
1 2

A  Rs.
500
Calculation: P'
= Rs. 500 P/A, 8%, 6
A
P = P' P/F, 8%, 2
A A

The total present worth PA is determined by adding and the

initial payment P0 in year 0
PT = P0 + PA
= 5000 + 500(P/A, 8%, 6)(P/F, 8%, 2)
= 5000 + 500(4.6299)(0.8573)
= Rs. 6981.60
 Example
Example: An engineering company in Hattimuda that owns 50 kattha of
valuable lands has decided to lease the rights to solar farm near MTU . The
primary objective is to obtain long term income to finance ongoing projects 6
and 16 years from the present time. The engineering company makes a
proposal to the solar company that it pay Rs. 200000 per year for 20 years
beginning 1 year from now, plus Rs. 100,000 in sixth year from now and
Rs. 150,000 in sixteenth year from now. If the mining company wants to pay
off its lease immediately, how much should it pay now if the investment
should make 16% per year?
 Rs. 150, 000
Cash Flow Diagram Rs. 100, 000

= Year
0 15 16 1718 19 20
1 2 3 4 5 6
7 R
s
.
P
i
=? 2
16% 0
0
Calculation:

The total present worth

P = Rs. 200,000 ( P/A,16%, 20) + Rs.
100,000 (P/F, 16% , 6) + Rs. 150,000
(P/F, 16%, 16)
= Rs. 1185768.1 +Rs. 41044.2 +Rs.
13956.0
= Rs. 1240768.4
 Questions
• Suppose you are offered the alternative of receiving either Rs 3,000 at
the end of 5 years or Rs P today. There is no question that the Rs 3,000
will be paid in full (no risk). Having no current need for the money, you
would deposit the P rupees in an account that pays 8% interest. What
value of P would make you indifferent in your choice between P rupees
today and the promise of Rs 3,000 at the end of 5 years from Now?

01/18/2026 59
 You borrowed Rs 1,000 from a bank for 3 years at 10% annual interest.
The bank offered you two options (a) repaying the loan all at once at the
end of 3 years, or (b) repaying the interest charges for each year at the
end of that year. The repayment schedules for the two options are as
follows: Options Year 1 Year 2 Year 3 Total
End of year Rs 100 Rs 100 Rs 1100 Rs 1300
repayment of
interest
End of period Rs 1300 Rs 1300
repayment

• Determine whether these options are equivalent, assuming that the

appropriate interest rate for our comparison is 10%.
01/18/2026 60
Linear and Geometric Gradient Series
 Linear Gradient Series

• Linear gradient series involves periodic

payments that increase or decrease by a constant
amount (G).
• If G>0, the series is referred to as an
increasing
gradient series.
• If G<0, the series is referred to as an
decreasing gradient series.
• First cash flow in the gradient series occurs at
the 62
 (N-
(N-2)G 1)G
3G
2G
G

0 1 2 3 N-1 N
4
Fig1: Typical Cash flow diagram of the gradient
series

63
 A1+(N-
A1+(N-
Fig: A1+42)
1)G
Increasing A1+3 G
A1+2 G G
Gradient A1+ G
A1
Series (G>0) G
G
0 1 2 3 4 5 N- =
N
1 0
A1 G
Fig: A1- A -
Decreasing G
1 =0
A1-
Gradient 2G A1-
3G A1-(N-1)G
Series 4G
(G<0) A1-(N-2)G
0 1 2 3 4 5 N- N- N
2 1
5
 Future worth Factor
Find F, given G, i, N

F = G/i { (1+i)N -1 - iN}

i

Functionally,
F = G (F/G, i, N)

65
Present worth Factor
Find P, given G, i, N

P = G [ (1+i)N –iN -1]

i2 (1+i)N

Functionally,
P = G (P/G, i, N)

66
Equal payment series conversion factor
Find A, given G, i, N

A = G [ (1+i)N – iN – 1 ]
i{(1+i)N – 1}

Functionally,
A = G (A/G, i , N)

67
 Numerical
A person is planning for his retired life. He has 10
more year of service. He would like to deposit
20% of his salary, which is Rs. 4,00,000, at the end
of first year, and there after he wishes to deposit
the amount with an annual increase of Rs. 50,000
for the next nine years with an interest rate of 15%.
Find the total amount at the end of the 10th year
of the above service?

68
 Years F = FA +FG
0 1 2 3 9 10
4 i = 15%
Rs. 4000
Rs. 4500
Rs. 5000
Rs. Rs.
5500 8000 Rs. 8500
FA = ?
=
Equal deposit 0 1 2 3 9 10
series 4
Rs.
4000
+
Rs. 4000 FG= ?
Gradient 0 1 2 3 9
deposit series 4 10
Rs.
500 Rs. 1000
Rs.
1500 Rs.
4000 Rs.
1
4500
F = Equal deposit series +
Gradient deposit series
F = FA + FG
F = A (F/A, 15% , 10) + G (F/G, 15%, 10)
= Rs. 1,15,56,000

70
 Numerical
Om Sir and Deepranjan sine have just opened two saving accounts at
their Sahakari. The account earns 10% annual interest. Om wants to
deposit Rs. 1000 in his account at the end of the 1st year and increase
this amount by Rs. 300 for each of the following 5 years. Deep wants
to deposit an equal amount each year for the next 6 years. What should
be the size of Deep's annual deposit so that the two accounts would
have equal balance at the end of 6 years?

71
 Years
0 1 2 3 4 56
i = 15%
Rs. Rs.
100 130 Rs. Rs.
0
0 0
160 0 R
190Rs
2200 s
Fig : Om’s Deposit Pla2n500
= .
.
Years
Fig: Equal 0 1 2 3 4 5 6
deposit
series Rs. 100 Rs. 100 Rs. 100Rs.
0
100Rs.0 100 0+ 0 0
Rs.
Fig : Gradient 0100 1 2 3 4 5
deposit Series 6
Ye0ar
Rs.
s
300 Rs. Rs.
600 Rs. 1
900 3
Solution
Given :G = Rs. 1000, i=10%, N=6 years

A = Equal deposit series + Gradient deposit series

A = Rs. 1000 + Rs. 300 ( A/G,10%,6)
A = Rs. 1000 + Rs. 300
(2.2236) A = Rs. 1667.08
Deep’s annual
contribution should be
Rs. 1667.08

73
Alternatively

The present worth of the combined series is:

P = Rs. 1000 (P/A, 10%, 6) + Rs. 300 (P/G,
10%, 6)
= Rs. 1000 (4.3553) + Rs. 300 (9.6842)
= Rs. 7260.56

The equivalent uniform deposit is:

A = Rs. 7260.56 (A/P, 10%, 6)
= Rs. 1667.02

74
 Numerical
An engineer has inspected the average cost on a
cement production for 8 years. Cost averages
were steady at Rs 10,000 per completed unit for
the first 4 years, but have increased consistently
by Rs 5,000 per unit for each of the last 4 years.
He plans to analyze the gradient increase using
the P/G factor. Where is the present worth
located for the gradient? What is the gradient
relation used to calculate total present worth in
year zero?i=10%

75
Solution

0 1 2 3 4 6 8
5 7

Rs10000
Rs15000
Rs20000
P=?
Rs25000

Rs30000

1
7
 4 6 8
5 7

Rs15000
Rs20000
Rs25000

Rs30000
4 6 8
5 7 4 6 7
+
5
8

Rs15000
Rs5000
Rs10000
Rs15000

77
P4 = 15000 (P/A, 10%, 4) + 5000
(P/G,10%,4)
= 15000 *3.1699 + 5000 * 4.3781
= 69,439

P0 = P4 (P/F, 10%, 4) + 10000 (P/A,10%,4)

= 69439 * 0.6830 + 10000 * 3.1699
= 79,125.84

78
 Consider the cash flows as below:
Calculate the present equivalent using
gradient series.
End of year Net Cash Flow i=15%
End of year Net Cash Flow
1 200,000
1 -8000
2 175,000
2 -7000
3 150,000
3 -6000
4 125,000
4 -5000
5 100,000

i=10% Ans:Rs.19,05
3
Ans:Rs.5,86,6
15

79
10000
i=15%
1 2 3 4
5 6
0

A=?

Ans:
3198.98

80
 50000
Find
A?

0 1 2
3
4 Ans:
9794.2
5
i=10%
2
 A=100
5 7
0 1 2 3 6 8
4

A=100
Find equivalent present worth at
i=10% from above cash flow
diagram.
Ans
:
10 82
0.4
Determine the required end of year
annual deposits that will generate cash
flow as below. 100
A A A A A 10000 1000
=

0 1 2 3 4 0 1 2 3 4
5 5

Ans:
656.025

83
 Nominal Interest rate

• If a financial institutions uses a unit of time other than a year, i.e. a

quarter, a month, half-year, then it quotes interest rate on annual basis
such as r% compounded monthly, quarterly, or half-yearly.

• The interest rate or Annual Percentage Rate (APR) is called the nominal
interest rate.

01/18/2026 84
 Effective Interest Rate
The effective interest rate is the one rate that truly represents the interest earned in a year.

ia = (1+r/M)M -1

where

ia = effective annual interest rate

M =the number of compounding period per year

r/M = the interest rate per compounding period

01/18/2026 85
 Continuous compounding interest rate

As the number of compounding periods 'M' becomes large, then r/M

becomes to small, hence as M approaches infinity, r/M tends to '0', we
comes to the situation of continuous compounding.

Ic = er -1

where r = nominal interest rate

01/18/2026 86
 Example
“ 18 % compounded
monthly”
We say 18% is the nominal interest rate or annual
percentage rate (APR) and compounding period is monthly
(12) i.e. 1.5% per month.
Month 1 2 3 4 5 6 7 8 9 10 11 12
Interest 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5
rate (% )

Fig: The nominal interest rate is determined by summing the individual

interest rates per period

3
 Nominal Interest Rates
r = 1.5% per month * 24 months
= 36% per two year period
r = 1.5% per month *12 months
= 18% per year period
r = 1.5% per month *6 months
= 9% per semi annual period r = 1.5%
per month* 3months
= 4.5% per quarter period

4
 Suppose that principal amount of Rs 1000 to be invested for
two years at a nominal rate of 12%
compounded semiannually.
• The interest earned during first six months is 1000* 0.12/2 =
Rs 60
• Total principal at the end of the first six months =
Rs (1000+60) = Rs 1060
• Interest earned during the second six months is
Rs 1060*0.12/2= Rs 63.60
• Total interest at the end of 1 year
= Rs 60 + Rs 63.60 = Rs 123.60
• The effective annual interest rate for the entire year
= 123.60/1000 * 100 = 12.36%
• The exact or actual rate of interest earned on the principal
during one year is the effective interest rate denoted by
ia
Relation between effective (ia) and nominal (r)
interest rate

ia= (1+r/M )M -1,

ia= (F/P, r/M, M) -1
Where,
M is the compounding period occur during the year.
r is the nominal interest rate

Note: when compounding takes place once annually,

i.e. M=1, effective interest rate is equal to
nominal
interest rate.
6
From Previous Example

Ia = (1+0.12/2 )2 -1
= 0.1236
= 12.36%

7
 Numerical
• Suppose that a Rs. 100 lump sum amount
is invested for 10 years at a nominal interest
of 6 % compounded quarterly. How
much is it worth at the end of the 10th year?
Solution
Four compounding period per year,
Total compounding period = 4*10
= 40 periods
Interest rate per period = 6%/4 = 1.5%

F = P (F/P, 1.5%, 40)

= Rs. 100 (1.015) 40 = Rs. 181.40

Alternatively,
Effective interest rate, ia = (1+r/M)M -1
= (1+0.06/4)4 -
1 = 6.14%
F = P (F/P, 6.14%, 10)
= 100 (1.0614)10 = 181.46
 Effective Intererst rate per Compounding
Period

ia = r% per time period t

M compounding periods per t
 Example
The different bank loan rates for three separate electric generation
equipment projects are listed below. Determine the effective rate on the basis
of the compounding period for each quote.
- 9% per year, compounded quarterly
- 9% per year, compounded monthly
- 4.5% per 6-months, compounded weekly
9% per year, compounded quarterly

2.25% 2.25% 2.25% 2.25%

r 9
i  
2.25%
m 4
9% per year, compounded monthly

1 0.75% 12

r 9
i  
0.75%
m 12
- 4.5% per 6-months, compounded weekly

1 4 8 12 16 20 24 26
0.173%

r 9
i  
0.173%
m 26
 Effective Interest Rate Per Payment Period
• ia= (1+r/M)M-1,is used to compute the effective interest rate
for any time duration.
• Suppose, If the cash flow transaction occur quarterly, but
interest is compounded monthly, we wish to calculate
the effective interest rate on a quarterly basis.
• This can be obtained by:
i = (1+r/M)C - 1
= (1+r/CK)C -1
Where, M = the number of interest periods per year
C = the number of interest periods per payment
K = the number of payment periods per year

Note that M =CK

 Numerical
Suppose that you make quarterly deposits in a saving account
which earns 9% interest compounded monthly. Compute the
effective interest rate per quarter.
Solution:
Given: r= 9%, C = three interest period per quarter,
K = four quarterly payments per
year, M = 12 interest periods per year.

i= (1+0.09/12)3 -1
= 2.27%
 Case 1: Equivalence Calculation When Payment period and
Compounding periods coincide

• Whenever the situation occurs where the compounding and

payment periods are equal (M=K), whether
compounded annually or at some other intervals, this
solution method can be used.
1. Identify the numbers of compounding periods (M)
2. Compare the effective interest rate per payment period,
with C=1 and K=M
i = r/M
3. Determine the numbers of compounding periods
N = M * (number of years)
 Case 2: Equivalence Calculation When Payment periods and Compounding
periods differs

• Whenever payment and compounding periods differ from

each other, one or the other must be transformed so
that both conform to the same unit of time.
• If payments occur quarterly and compounding occurs
monthly, we can calculate the effective interest rate
per quarter.
• If payments occur monthly and compounding occurs
quarterly, we can find out the equivalent monthly
interest rate.
• Two situation are considered:

1
8
 Compounding more frequents than payments

• Identify the numbers of compounding periods per

year (M), the number of payments period per
year K, and the number of interest payment period
(C).
• Compute the effective interest rate per payment
period
(ia) = [1+r/M]C -1
• Find the total number of payment periods.
N = K * (number of years)
• Use i and N in the appropriate formula.

1
9
 Numerical
Suppose you make equal quarterly deposits
of Rs. 1000 into a fund that pays interest at
a rate of 12% compounded monthly. Find
the balance at the end of year two?

2
0
 F=
i= 3.030 per ?
quarter 12% compounded
monthly

0 1 2 3 4 5 6 7 8 9 1 2 2 2 2 2 Month
0 0 1 2 3 4 s
Rs. 1000 Rs. 1000Rs. Rs. 1000 Rs.
1000 1000
K
K K
Fig: Quarterly deposits with monthly
compounding

2
1
Solution:
Given, A = Rs. 1000per quarter, r = 12%per
year, M = 12 compounding per year, N = 8 quarters

1. Identifying the parameter values for M, K, and C.

M = 12 compounding periods per year
K = 4 payment periods per year
C = 3 interest period per quarter
2. Compute the effective interest rate
per payment period,
(ia) = [1+0.12/3*4]3 -1= 3.030%per
quarter.
3. Find the total number of payment
period
N = K *(number of years) = 4*2 = 8
quarters.
4. Use i and N in the appropriate formula
F = Rs. 1000 (F/A, 3.030%, 8) = Rs.
8901.81
2
2
 Compounding less frequents than payments

• Two assumptions govern how interest is calculated.

• First, whenever a deposit is made, it starts to earn interest.
• Second, the deposits made within a quarter do not earn
interest until the end of quarter.
 Numerical
Suppose that you make Rs. 500
monthly
deposits to a tax-deferred retirement plan
(Social Security Fund) that pays interest at a
rate of 10% compounded quarterly. Compute
the balance at end of 10 years.
 Compou Compou Compou
n n ding n ding
i=10%/4=2. ding
5%
perio period
0 1 2 d4 5 6 period
3(C) 8 9(C1) 0 12 Month
(K) (K) (K) (K) (K) (K) (K) (K) (K) (K) s
7 11
(K) (C )
i=(1+0.025)1/3 - Monthly
Rs. payments
1=0.826% 500 (K) =
Payment
period F=
?

0 3 6 11 12
7 0 Month
s
A= Rs.
500
Solution
Given, r= 10%per year ,
M = four quarterly compounding per year
K = 12 payments period per year
A = Rs. 500
N = 120 months.
Step 1
• Identifying values for M, C, and K
M = 4 compounding period per year
K = 12 payment periods per year
C = 1/3 interest period per payment
period
• Effective interest rate per payment period
i=(1+0.10/4)1/3 -1
i= 0.826%per month.
• Find N
N = 12 *10 = 120 payment periods
• Use I and N in the formula
F = Rs. 500(F/A, 0.826%,120) = Rs.
101,907.89
 Numerical
Consider the previous numerical, assuming
money deposited during a quarter (the
compounding period) will not earn any
interest . Compute F at the end of 10 years.
 F=
?

0 3 6 1 1 Months
7
1 2
0
A
=Rs.
500

0 1 2 3 4 5 3 3 3 4 Quarter
7 8 9 0

Rs.
1500
Rs.
Solution
• Three monthly deposits during each quarterly will be placed
at the end of each quarter.
• Then the payment period coincides with interest period.

i= 10%/4 =2.5% per quarter

A = 3(Rs. 500) = Rs. 1500 per
quarter N = 4(10) = 40 payment
periods
F = Rs. 1500 (F/A, 2.5%, 40) =
Rs. 101,103.83.
Rastriya Banijya Bank pays interest on a
saving account at 6.6% compounded
monthly. N I C A s i a Bank pays 6.65%
interest on a saving account
compounded semiannually. Which bank
pays its saver the most interest?
r = 6% per 6 months
=12% compounded semi annually

r =1% per 1 month

=12%compounded monthly

r =3% per 3 months

=12% compounded quarterly
A bank pays an interest of 1% per month. What is the future
equivalent of a present sum of money of Rs. 100 after 5
years. (ans:181.65)

Mr Ram deposits Rs.100 semiannually for 2 years which earns

interest of 1% per month. What is the equivalent future
amount at the end of year 2. (Rs. 439)

Equally monthly deposit of Rs.100000 at nominal interest rate

of 12% compounded daily. What is the future worth after 5
years. (ans:8173533)

Equal two-yearly deposits of Rs. 200 for 20 years at interest of

10% per year. What is the future worth at the end of year 20.
(ans: 5454.76)
 SUMMARY
• Types of Cash Flow
- Single payment: A single present or future cash flow
-Uniform series: a series of equal payments at
regular intervals.
-Linear Gradient series: A series of flows increasing
or decreasing by a fixed amount at regular intervals.
- Geometric Gradient series: A series of flows
increasing or
decreasing by a fixed percentage at regular intervals.
• Nominal Interest is the stated rate of interest for a given
period (usually a year).
• Effective interest is the actual rate of interest, which
accounts for the interest accumulated over a given
period.
• Relation between nominal and effective
i=(1+r/M)M-1
• In any equivalence problem the interest to use is the
effective interest rate per payment period:
i=(1+r/CK)C-1
 Examples
• Suppose you make equal quarterly deposits of Rs 1,000 into a fund that
pays interest at a rate of 12% compounded monthly. Find the balance at
the end of year '1'.
• A series of equal quarterly receipts of Rs 500 extends ober a period of 5
years. What is the present value of this quarterly payment series at 8%
interest compounded continuously?
• Suppose you make Rs 1,000 monthly deposit to a registered retirement
savings plan that pays interest at a rate of 10% compounded quarterly.
Compute the balance at the end of 10 years.
01/18/2026 119
 Cases

01/18/2026 Er. Niswan Dhakal (MTU) 120

• On January 7, 2025, Erling Halaand became the richest player in the Premiere League
by agreeing to call Manchester City home for the next decade. The Citizen striker
signed a 10-year, Rs. 130 million contract extension Tuesday that guarantees him an
PL-record Rs. 37 million in bonuses. Base salaries for his new contract are Rs. 600,000
(2025), Rs. 1.4 million (2026), Rs. 6 million (2027), Rs. 7 million (2028), Rs. 9 million
(2029), Rs. 10.5 million (2030), Rs. 13.5 million (2031), Rs. 13 million (2032), Rs. 15
million (2033), and Rs. 17 million (2034). He received an initial signing bonus of Rs.
7.5 million. Halaand also received two roster bonuses in the new deal. The first is
worth Rs. 22.5 million and is due in March 2025. The second is worth Rs. 7 million and
is due in March 2026. Both roster bonuses will be treated as signing bonuses and
prorated annually. Because 2031 is an uncapped year (the league’s collective
bargaining agreement (CBA) expires after the 2030 season), the initial signing bonus
and 2025 roster bonus can be prorated only over the first six years of the contract. If
the CBA is extended prior to March 2006, then the second roster bonus of Rs. 7 million
can be prorated over the final nine seasons of the contract. If the CBA is extended
prior to March 2026, then his cap hits (rounded to nearest thousand) will change to
Rs. 7.178 million (2026), Rs. 11.778 million (2027), Rs. 12.778 million (2028), Rs.
14.778 million (2029), Rs. 16.278 million (2030), Rs. 14.278 million (2031), Rs. 13.778
million (2032), Rs. 15.778 million (2033), and Rs. 17.778 million (2034). With the
salary and signing bonus paid at the beginning of each season, the net annual
01/18/2026 Er. Niswan Dhakal (MTU) 121
payment schedule looks like the following:
Beginning of Season Base Salary (Rs. ) Prorated Signing Bonus Total Annual Salary

2025 600000 5000000 5,600,000.00

2026 1400000 5000000+778000 7,178,000.00
2027 6000000 5000000+778000 11,778,000.00
2028 7000000 5000000+778000 12,778,000.00
2029 9000000 5000000+778000 14,778,000.00
2030 10500000 778000 11,278,000.00
2031 13500000 778000 14,278,000.00
2032 13000000 778000 13,778,000.00
2033 15000000 778000 15,778,000.00
01/18/2026 Er. Niswan Dhakal (MTU) 122
2034 17000000 778000
a)How much is Halaand’s contract actually worth at the time of
signing? Assume that Halaand’s interest rate is 6% per year.
b)For the initial signing bonus and the first year’s roster bonus,
suppose that the Blues allow Halaand to take either the prorated
payment option as just described (Rs. 30 million over five years)
or a lump-sum payment option in the amount of Rs. 23 million at
the time he signs the contract. Should Halaand take the lump-
sum option instead of the prorated one?

01/18/2026 Er. Niswan Dhakal (MTU) 123

• You may have already won Rs. 2 million in a magazine subscription lottery!
Just peel the game piece off the Instant Winner Sweepstakes ticket, and
mail it to us along with your order for subscriptions to your two favorite
magazines. As a grand prize winner, you may choose between a Rs. 1
million cash prize paid immediately or Rs. 100,000 per year for 20 years—
that’s Rs. 2 million! Suppose that, instead of receiving one lump sum of Rs.
1 million, you decide to accept the 20 annual installments of Rs. 100,000.
If you are like most jackpot winners, you will be tempted to spend your
winnings to improve your lifestyle during the first several years. Only after
you get this type of spending “out of your system” will you save later sums
for investment purposes. Suppose that you are considering the following
two options:
• Option 1: You save your winnings for the first 7 years and then spend
every cent of the winnings in the remaining 13 years.
• Option 2: You do the reverse, spending for 7 years and then saving for 13
years. If you can save winnings at 7% interest, how much would you have
at the end of 20 years, and what interest rate on your savings will make
these two options equivalent?
01/18/2026 Er. Niswan Dhakal (MTU) 124
01/18/2026 Er. Niswan Dhakal (MTU) 125
• On the day his baby was born, a father decided to establish a savings account
for the child’s college education. Any money that is put into the account will
earn an interest rate of 8% compounded annually. The father will make a series
of annual deposits in equal amounts on each of his child’s birthdays from the 1st
through the 18th, so that the child can make four annual withdrawals from the
account in the amount of Rs. 300,000 on each birthday. Assuming that the first
withdrawal will be made on the child’s 18th birthday, which of the following
equations are correctly used to calculate the required annual deposit.

01/18/2026 Er. Niswan Dhakal (MTU) 126

01/18/2026 Er. Niswan Dhakal (MTU) 127
 Questions?
• 2s.1 You wish to have Rs. 10,000 in an account 10
years from now. How much money must be
deposited in the account now in order to have this
amount if the account pays 8% compounded
annually?
a. Rs. 1,490 b. Rs. 3,871 [Link]. 4,632 d. Rs.
5,584
• 2s.2 Assume that Rs. 500 is deposited today, two
years from now, four years from now, six years from
now, and eight years from now. At a 10% interest
compounded annually, determine the future value
at the end of year 9.
– a. Rs. 4,174
– b. Rs. 3,790
– c. Rs. 2,085
– d. Rs. 1,895
• 2s.3 What single payment at the end of year 5 is
equivalent to an equal annual series of payments of
Rs. 800 beginning at the end of year 3 and ending
at the end of year 12? The interest rate is 8%
compounded annually.
– a. Rs. 5,797
– b. Rs. 6,260
– c. Rs. 6,762
– 01/18/2026
d. Rs. 6,883 Er. Niswan Dhakal (MTU) 128
• 2s.4 Four years ago, you opened a mutual fund
account and made three deposits (Rs. 200 four
years ago, Rs. X three years ago, and Rs. 300 a
year ago) where you earned varying interest rates
according to the following diagram. Today, your
balance shows Rs. 1,000. Determine the amount
of deposit that was made three years ago (Rs. X).
See the following figure.
– a. Rs. 215
– b. Rs. 237
– c. Rs. 244
– d. Rs. 259
• 2s.5 How much money should be deposited now in
an account that pays 10% interest compounded
annually in order to make five equal annual
withdrawals of Rs. 5,000?
– a. Rs. 8,052
– b. Rs. 9,050
– c. Rs. 16,761
01/18/2026 Er. Niswan Dhakal (MTU) 129
– d. Rs. 18,954
• 2s.6 What value of C makes these two cash
flows equivalent at an interest rate of 10%?
– a. Rs. 29.65
– b. Rs. 35.98
– c. Rs. 47.33
– d. Rs. 43.96

• 2s.7 Calculate the future worth of 20 annual

Rs. 2,000 deposits in a savings account that
earns 9% (compounded annually). Assume
that all deposits are made at the beginning of
each year.
– a. Rs. 126,005
– b. Rs. 111,529
– c. Rs. 113,529
01/18/2026 Er. Niswan Dhakal (MTU) 130
– d. Rs. 92,037
• 2s.8 You borrow Rs. 20,000 from a bank to be
repaid in three equal annual installments at 9%
interest compounded annually. What is the portion
of interest payment for the second annual
payment?
– a. Rs. 1,800
– b. Rs. 1,251
– c. Rs. 1,089
– d. Rs. 549
• 2s.9 The following two cash flows are said to be
economically equivalent at 10% interest.
Determine the value of X for the second cash flow
series.
– a. X=Rs. 1,505
– b. X=Rs. 1,500
– c. X=Rs. 1,197
– d. X=Rs. 1,192
01/18/2026 Er. Niswan Dhakal (MTU) 131
• 2s.10 What is the amount of five equal annual deposits that can
provide five annual withdrawals, where a first withdrawal of Rs. 1,000 is
made at the end of year 6 and subsequent withdrawals increase at the
rate of 10% year over the previous year’s if the interest rate is 10%
compounded annually?
a. Rs. 745 b. Rs. 789 c. Rs. 1,000 d. Rs. 1,563
• 2s.11 You borrowed Rs. 4,000 to finance your educational expenses at
the beginning of your junior year of college at an interest rate of 9%
compounded annually. You are required to pay off the loan with five
equal annual installments, but the first payment will be deferred until
your graduation. Determine the value of C, the amount of annual
payments.
– a. C=Rs. 891
– b. C=Rs. 1,082.
– c. C=Rs. 1,121
– d. C=Rs. 1,222
• 2s.12 Consider the following cash flow series at varying interest rates.
What is the equivalent present worth of the cash flow series?
– a. P=Rs. 5,068
– b. P=Rs. 4,442
– c. P=Rs. 4,077
– d. P=Rs. 3,833
• 2s.13 At what annual interest rate will Rs. 1,000 invested today be
worthRs. 2,000 in 10 years?
– a. 6.5%
– b. 7.2%
01/18/2026 Er. Niswan Dhakal (MTU) 132
– c. 9.3%
• 2s.14 If you borrow Rs. 20,000 at an interest rate of 8%,
compounded annually, with the repayment schedule as
shown, what is the amount A? (Note that there is a missing
payment in year 5.)
a) A=Rs. 2,393
b) A=Rs. 2,793
c) A=Rs. 3,193
d) A=Rs. 3,593
• 2s.15 You plan to make 15 annual deposits in a saving account
that pays 6% interest compounded annually. If the first
deposit of Rs. 1,000 is made at the end of the first year and
each subsequent deposit is Rs. 500 more than the previous
one, the value of the account at the end of 15 years will be
nearly:
a) a. Rs. 87,021
b) b. Rs. 92,242
c) c. Rs. 97,777
d) d. Rs. 71,550
• 2s.16 How long would it take an investment to triple if the
interest rate is 8% compounded annually?
a) a. 9 years
b) b. 12 years
c) c. 14 years
01/18/2026 Er. Niswan Dhakal (MTU) 133
d) d. 16 years
• 2s.17 If you borrow Rs. 25,000 at an interest rate of 9%,
compounded annually with the following repayment
schedule, what is the required amount A?
a) A=Rs. 5,576
b) A=Rs. 8,883
c) A=Rs. 9,521
d) A=Rs. 8,014

• 2s.18 If Rs. 1,000 is deposited in a savings account at the

beginning of each year for 20 years (a total number of
deposits=20) and the account draws interest at 7%
compounded annually, the value of the account at the
end of 20 years will be nearly:
– a. Rs. 21,400
– b. Rs. 46,936
– c. Rs. 40,996
– d. Rs. 43,865
01/18/2026 Er. Niswan Dhakal (MTU) 134
• 2s.19 You are preparing to buy a vacation home five years from now The home
will cost Rs. 80,000 at that time. You plan on saving three deposits at an interest
rate of 8%:
Deposit 1: Deposit Rs. 10,000 today.
Deposit 2: Deposit Rs. 12,000 two years from now.
Deposit 3: Deposit Rs. X three years from now.
How much do you need to deposit in year 3 to ensure that you have the necessary
funds to buy the vacation home at the end of year 5?
– a. Rs. 41,556
– b. Rs. 42,586
– c. Rs. 43,030
– d. Rs. 44,115
• 2s.20 The accompanying diagram shows the anticipated cash dividends for
Delta Electronics over the next four years. John is interested in buying some
shares of this stock for a total of Rs. 100 and will hold them for four years. If
John’s interest rate is known to be 8% compounded annually, what would be the
desired (minimum) total selling price for the set of shares at the end of the
fourth year?
– a. Rs. 93.67
– b. Rs. 66.35
– c. Rs. 86.23
– d. Rs. 90.11
• 2s.21 You are planning to contribute Rs. 5,000 a year to a mutual fund that
earns an average of 6% per year. If you continue to contribute for the next 10
years, how much would you have in your account?
– a. Rs. 53,000
– b. Rs. 65,904
– 01/18/2026
c. Rs. 69,858 Er. Niswan Dhakal (MTU) 135
– d. Rs. 70,515
• 2s.22 Consider the cash flow series given in the accompanying
table. What value of C makes the deposit series equivalent to
the withdrawal series at an interest rate of 9% compounded
annually?
– a. Rs. 334.50
– b. Rs. 376.17
– c. Rs. 390.15
– d. Rs. 409.65
• 2s.23 What value of C makes the two cash flows equal? Assume
i = 10% .
– a. Rs. 34
– b. Rs. 30
– c. Rs. 43
– i=10%
– d. Rs. 39
• 2s.24 In computing the equivalent present worth of the cash
flow series at period 0, which of the following expressions is
incorrect?
a) P=Rs. 100(P/A, i, 4)(P/F, i, 4).
b) P=Rs. 100(F/A, i, 4)(P/F, i, 7).
01/18/2026
c) P=Rs. 100(P/A, i, 7)−Rs. 100(P/A, i, 3). Er. Niswan Dhakal (MTU) 136
• 2s.25 State the value of C that makes
the following two cash flow transactions
economically equivalent at an interest
rate of 10%:
– a. Rs. 38.76
– b. Rs. 40.38
– c. Rs. 52.25
– d. Rs. 43.96
• 2s.26 Consider the following cash flow
series at varying interest rates. What is
the equivalent present worth of the
cash flow series?
– a. Rs. 3,833
– b. Rs. 2,987
– c. Rs. 4,021
– d. Rs. 3,985
01/18/2026 Er. Niswan Dhakal (MTU) 137
• You are making Rs. 1,000 monthly deposits into a fund that pays interest at a rate of 6% compounded monthly.
What would be the balance at the end of 10 years?
a) a. Rs. 163,879
b) b. Rs. 158,169
c) c. Rs. 127,200
d) d. Rs. 159,423
• 3s.2 Two banks offer the following interest rates on your deposit: Bank A: 8% interest compounded quarterly Bank
B: 7.9% interest compounded continuously Which of the following statements is not true?
a) a. The annual percentage yield (APY) for Bank A is 8.24%.
b) b. The effective annual interest rate for Bank B is 8.22%.
c) c. Bank B offers a better deal as your money earns interest continuously.
d) d. The annual percentage rate (APR) for Bank B is 7.9%.
• 3s.3 You are making semiannual deposits into a fund that pays interest at a rate of 8% compounded continuously.
What is the effective semiannual interest rate?
a) a. 4.000%
b) b. 4.081%
c) c. 4.164%
d) d. 4.175%
• 3s.4 Calculate the future worth of 15 annual Rs. 3,000 deposits in a savings account that earns 9% compounded
monthly. Assume that all deposits are made at the beginning of each year.
a) a. Rs. 96,010
b) b. Rs. 99,884
c) c. Rs. 90,764
d) d. Rs. 99,279
• 3s.5 You borrow Rs. 20,000 from a bank to be repaid in monthly installments for three years at 9% interest
compounded monthly. What is the portion of interest payment for the 18th payment?
a) a. Rs. 150.00
b) b. Rs. 88.28
c) c. Rs. 80.04
d) d. Rs. 84.17
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• 3s.6 You borrowed Rs. 10,000 from a bank at an interest rate of 9%,
compounded monthly. This loan will be repaid in 48 equal monthly installments
over four years. Immediately after your 25th payment, if you want to pay off the
remainder of the loan in a single payment, the amount is close to
a) a. Rs. 5,723
b) b. Rs. 5,447
c) c. Rs. 5,239
d) d. Rs. 5,029
• 3s.7 You borrowed Rs. 100,000, agreeing to pay the balance in 10 equal annual
installments at 8% annual interest. Determine the remaining loan balance right
after the fifth payment.
a) a. Rs. 74,515
b) b. Rs. 68,894
c) c. Rs. 59,503
d) d. Rs. 49,360
• 3s.8 Consider the following two cash flow transactions. If they are economically
equivalent at 10% interest, find the value of C.
a) C=Rs. 325
b) C=Rs. 282
c) C=Rs. 310
d) C=Rs. 277
• 3s.9 Compute the present worth (P) for the cash flows with the different periodic
interest rates specified. The cash flows occur at the end of each year over six
years.
a) P=Rs. 2,140
b) P=Rs. 2,154
c) P=Rs. 2,234
d) P=Rs. 2,249
• 3s.11 Your company borrowed Rs. 150,000, agreeing to pay the balance in 24
equal monthly installments at 9% compounded monthly. Determine the total
interest payment during the first 12 months.
a) a. Rs. 2,346
b) b. Rs. 10,592
c) c. Rs. 13,500
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d) d. Rs. 6,343 Er. Niswan Dhakal (MTU) 139
 Questions

1. Suppose you make an annual contribution of Rs. 3000 to your

saving account at the end of each year for 10 years. If your saving
accounts earns 7% interest annually, how much can you be drawn at
the end of 10 years.(ans: Rs. 41449.34)
2. Suppose in the above example, all deposits will made at the
beginning of each period instead. How would you compute the
balance at the end of period ten. ( ans: Rs. 44350.797)
3. If father on the day his son is born wishes to determine, what
lump amount would have to be paid into an account bearing an
interest of 12% per year to provide withdrawls of Rs.2000 on each
of the son's 18th, 19th, 20th, and 21st birthdays. (ans: Rs. 885)
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 THANK YOU

01/18/2026 Er. Niswan Dhakal (MTU) 141