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The document discusses various time value of money concepts including: 1. An individual is given the choice between an annual pension of Rs. 20,000 for life or a lump sum of Rs. 1,50,000. If the individual expects to live 15 more years and the interest rate is 15%, which option should they choose. 2. Calculating the interest rate of a Kisan Vikas Patra that doubles in 8.5 years using the rule of 69. 3. If the effective annual interest rate is 17.87%, what is the nominal annual rate for a debt with quarterly payments. So in summary, the document presents multiple word problems involving concepts like present and future value

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Aman Wadhwa
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82 views1 page

0ecd7tvm Assign

The document discusses various time value of money concepts including: 1. An individual is given the choice between an annual pension of Rs. 20,000 for life or a lump sum of Rs. 1,50,000. If the individual expects to live 15 more years and the interest rate is 15%, which option should they choose. 2. Calculating the interest rate of a Kisan Vikas Patra that doubles in 8.5 years using the rule of 69. 3. If the effective annual interest rate is 17.87%, what is the nominal annual rate for a debt with quarterly payments. So in summary, the document presents multiple word problems involving concepts like present and future value

Uploaded by

Aman Wadhwa
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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TIME VALUE OF MONEY 1. At the time of his retirement Mr.

Ojha is given two options: (i) (ii) An annual pension of Rs 20,000 as long as he lives A lump sum payment of Rs 1,50,000.If Mr.Ojha expects to live for 15 years and rate of interest is 15%, which alternative should he select.

2.The money invested in Kisan Vikas Patra today doubles in eight years and six months.What is the rate of interest per annum as per the Rule of 69? 3.If the effective annual rate of interest is 17.87%, then on a debt that has quarterly payments ,what is the nominal annual rate? 4.A finance company advertises that it will pay a lump sum of Rs 10,000 at the end of 6 years to investors who deposit annually Rs 1,000.What interest rate is implicit in this offer? 5.A company borrows Rs 6,00,000 at an interest rate of 15%. The loan is to be repaid in 5 equal annual installments payable at the end of each of the next 5 years. Prepare the loan amortization schedule. 6.Fifteen annual payments of Rs 5,000 are made into a deposit account that pays 14% interest per year. What is the future value of this annuity at the end of 15 years? 7.Assume the rate of interest is 12% Compute the effective rate of interest if interest is paid (1)annually (2) quarterly 8. Mr.X has Rs..1,00,000 to deposit in a bank account for 3 years. Assuming (1)annual compounding(2) semi- annual compounding(3) quarterly compounding at a stated annual interest of 4 percent (a) compute the amount he would have at the end of the third year(b) the effective rate of interest he would earn on each alternative and (c) which plan should he choose? 9. ABC Ltd. has borrowed 30,00,000 from Canbank Home Finance Ltd to finance the purchase of a house for 15 years. The rate of interest on such loans is 24 percent per annum Compute the annual payment instalment 10. If the discount rate is 10 %, compute the present value of (1) Rs. 100 at the end of 5 years (2) ) Rs. 100 at the end of 10 years

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