Simple Interest

1. Find the value of $10,000 saved at a simple interest rate of 5% for

a) 6.5
b)
c) 2
5 years:
years:
SET = 365 ▼

Dys = 0 6.5
2 xx365
5 365 EXE

I% = 0 5 EXE

-10000 EXE ▼
PV = 0

SI = 3250
1000
1250
ALL:SOLVE SOLVE
SFV = 13250
11000
12500
 Simple Interest
2. For a 5-year hire purchase loan of $60,000 for a car at 4.5%
interest rate, compute:
a) Total Repayment Value
SET = 365 ▼

Dys = 0 5 x 365 EXE

I% = 0 4.5 EXE

PV = 0 60000 EXE ▼

SI = -13500
ALL:SOLVE SOLVE
SFV = -73500
 Simple Interest
2. For a 5-year hire purchase loan of $60,000 for a car at 4.5%
interest rate, compute:
b) Monthly Installment
73500 ÷ ( 5 x 12 ) EXE

1225
 Compound Interest
2. For a 5-year hire purchase loan of $60,000 for a car at 4.5%
interest rate, compute:
c) Effective Interest Rate
SET = End ▼

n=0 60 EXE ▼

PV = 0 60000 EXE

PMT = 0 -1225 EXE ▲

I% = 0 SOLVE I% = 0.6910..
 Compound Interest
2. For a 5-year hire purchase loan of $60,000 for a car at 4.5%
interest rate, compute:
c) Effective Interest Rate

∴ Effective Interest Rate = 0.691 x 12 EXE

8.29%

= Effective Borrowing Cost

 Future Value with Compound
Interest
3. Find the future value of an investment of $20,000 for 20 years
at the following compounding rates:
a) 12%
b)
c) 8%
8.5%
SET = End ▼

20 EXE
n=0

I% = 0 12
8.5
8 EXE

PV = 0 -20000 EXE

FV = 0 SOLVE FV = 192925.8619
93219.14288
102240.9225
 Present Value with
Compound Interest
4. In order to receive $1 million in 20 years time, how much you
invest now if you could generate an investment return of 10% p.a?

20 years

PV FV = 1000000

FV = 1000000
i = 10%
N = 20
 Present Value with
Compound Interest
4. In order to receive $1 million in 20 years time, how much you
invest now if you could generate an investment return of 10% p.a?

SET = End EXE

Payment
1:Begin SET = Begin ▼
2:End
20 EXE
n=0

EXE ▼
I% = 0 10

FV = 0 1000000 EXE ▲
 Present Value with
Compound Interest
4. In order to receive $1 million in 20 years time, how much you
invest now if you could generate an investment return of 10% p.a?

PV = 0 SOLVE PV = -148643.628

The –(ve) sign in PV means you are investing and the amount
is $148644 for a period of 20 years at a return of 10%.
At the end of 20 years, you shall receive $1 million
 ANNUITY
• Annuity – series of constant cash flows paid or received at regular
time intervals

– Ordinary Annuity : end of period [END MODE]

• Eg: car loan, house mortgage

End mode

– Annuity Due : beginning of period [BEGIN MODE]

• Eg: insurance premium

Begin mode
 Present Value with Annuity
Payment
5. How much you must pay for an annuity of $48,000 per annum for
15 years if your investments could yield a weighted average return
of 10%? The first payment will be made at the end of the first year.
15 years
…………………………
$48.000
$48.000
$48.000

PMT = 48000
i = 10%
N = 15
 Present Value with Annuity
Payment
5. How much you must pay for an annuity of $48,000 per annum for
15 years if your investments could yield a weighted average return
of 10%? The first payment will be made at the end of the first year.

SET = End ▼

15 EXE
n=0

I% = 0 10 EXE

PMT = 0 48000 EXE ▲

PV = 0 SOLVE
PV = -365091.8163
 Annuity Payment
7. For a 20-year housing loan of RM200,000 at an interest rate of 8%
(monthly rest), compute the:
a) Monthly nominal repayment amount
Key in data:
PV = 200000
N = 20 x 12
= 240
i = 8%÷12
= 0.667%

PMT = 0 SOLVE PMT = - 1672.880138

Answer = RM1,672.88 per month

 Annuity Payment
7. For a 20-year housing loan of RM200,000 at an interest rate of 8%
(monthly rest), compute the:
b) Calculate the total nominal repayment

PMT = - 1672.880138 Ans x 240 EXE

PMT = - 401491.2331

Answer = RM401,491.23 total nominal repayment

 Annuity Payment
7. For a 20-year housing loan of RM200,000 at an interest rate of 8%
(monthly rest), compute the:
c) Recalculate (a) and (b) assuming the interest rate has changed
overnight by 1%
Monthly nominal repayment amount

▲ I% = 0.66666667 9 ÷ 12 EXE

PMT = - 401491.2331 SOLVE

PMT = - 1799.451912

Answer = RM1,799.45 per month

 Annuity Payment
7. For a 20-year housing loan of RM200,000 at an interest rate of 8%
(monthly rest), compute the:
c) Recalculate (a) and (b) assuming the interest rate has changed
overnight by 1%
Total nominal repayment amount

PMT = - 1799.451912 Ans x 240 EXE

PMT = - 431868.4588

Answer = RM431,868.46 total nominal repayment

 Annuity Payment
8. En. Asraf, age 25, wishes to retire at the age of 55. Upon
retirement, he wants to receive $36,000 per annum for 20 years. If
the long-term annualized rate of return is 7%, what would be his
annual contribution before retirement?
$36,000 p.a
25 55 75

Now Retire from work Retire from life

i) Calculate Present Value at age 55, PV55

ii) Calculate PMT by taking PV55 value as FV
 Annuity Payment
i) Calculate Present Value at age 55, PV55

SET = End ▼

20 EXE
n=0

I% = 0 7 EXE

PMT = 0 36000 EXE ▲

PV = 0 SOLVE
PV = -381384.5128
 Annuity Payment
ii) Calculate PMT by taking PV55 value as FV

SET = End ▼

30 EXE
n=0

I% = 0 7 EXE

FV = 0 381384.51 EXE ▲

PMT = 0 SOLVE PMT = -4037.4903

 Annuity Payment
10. Calculate the value of an annuity of $10,000 for 8 payments in which the
first payment is to be made at the beginning of the first year. Interest rate
is 6%.

8 years
…………………………
$10.000
$10.000
$10.000 SET = BEGIN
PMT = -10000
i = 6%
N =8

FV = 0 SOLVE FV = 104913
?
 GROWTH ADJUSTED RATE OF
RETURN
IA = r – g x 100
1+g
where r = rate of return
g = growth rate or
i = inflation rate

OR IA = 1 + r - 1 x 100
1+g
 Education Fund
14. Puan Rose’s daughter, Amelia intends to further her studies in a private
college under a 3-year degree programme in 10 years’ time. Current
tuition fees are $30,000 per annum. It is expected that the tuition fees
increase yearly at a 4% rate. Investment rate is at 7%.

i) 10 years

PV FV10 = ?

PV = -30000
i = 4%
N = 10
FV10 =
=?44407
 Education Fund
14. Puan Rose’s daughter, Amelia intends to further her studies in a private
college under a 3-year degree programme in 10 years’ time. Current
tuition fees are $30,000 per annum. It is expected that the tuition fees
increase yearly at a 4% rate. Investment rate is at 7%.

FV10 = PMT
ii)

PV10 = ?
SET = BEGIN
PMT = 44407
iA = (107/104-1)*100
N =3
PV10 =129521
=?
 Education Fund
14. Puan Rose’s daughter, Amelia intends to further her studies in a private
college under a 3-year degree programme in 10 years’ time. Current
tuition fees are $30,000 per annum. It is expected that the tuition fees
increase yearly at a 4% rate. Investment rate is at 7%.

iii) Calculate the lump-sum savings required to meet the education costs

PV = ? PV10 = FV

FV = 129521
i =7
PV =65842
=?
N = 10
 Education Fund
14. Puan Rose’s daughter, Amelia intends to further her studies in a private
college under a 3-year degree programme in 10 years’ time. Current
tuition fees are $30,000 per annum. It is expected that the tuition fees
increase yearly at a 4% rate. Investment rate is at 7%.
iii) Calculate the amount required for an annuity savings plan with the first
savings installment starting today

PMT = ? FV

SET = BEGIN PMT =-744

=?
=-8761
FV = 129521
i = 7/12
7 Change from annual to
monthly?
N = 10*12
10
 Retirement Plan
15. En. Shah wants to retire very soon. After retirement, he wishes to receive
$36,000 per annum. He would like his income to be hedged against
inflation by adopting an income growth rate of 3% each year. If an
investment portfolio with an expected annualised return of 8% could be
constructed, what is the amount that he needs to put in?
$36,000
55

Amount needed = PMT

iA
iA = (108/103)-1 * 100
Amount needed = 36000
4.85%
= 742268
 Retirement Plan
15. En. Shah wants to retire very soon. After retirement, he wishes to receive
$36,000 per annum at the beginning of the year. He would like his
income to be hedged against inflation by adopting an income growth rate
of 3% each year. If an investment portfolio with an expected annualised
return of 8% could be constructed, what is the amount that he needs to put
in?
$36,000
55

Amount needed = PMT + PMT

iA
iA = (108/103)-1 * 100
Amount needed = 36000 + 36000
4.85%
= 778268
 Retirement Plan
17. If you could afford to contribute $22,809 every year for 15 years. What
would be the required rate of return should you wish to have $1 million at
the end of your investment period?

PMT = - 22809
N = 15
FV = 1000000
i = ?

i = 14%
 Amortization
7. For a 20-year housing loan of RM200,000 at an interest rate of 8%
(monthly rest), compute the:
a) Monthly nominal repayment amount
Key in data:
PV = 200000
N = 20 x 12
= 240
i = 8%÷12
= 0.667%

PMT = 0 SOLVE PMT = - 1672.880138

Answer = RM1,672.88 per month

 Amortization
7. For a 20-year housing loan of RM200,000 at an interest rate of 8%
(monthly rest), compute the:
a) Balance outstanding after 3 years

AMRT PM1 = 1
PM2 = 36
PV = 200000
N = 240
i = 0.667%
PMT = -1672.88

BAL:SOLVE SOLVE BAL = 186236.28

Answer = RM186236.28 O/S Balance after 3 years

 Amortization
7. For a 20-year housing loan of RM200,000 at an interest rate of 8%
(monthly rest), compute the:
a) Total Interest paid after 3 years

AMRT PM1 = 1
PM2 = 36
PV = 200000
N = 240
i = 0.667%
PMT = -1672.88

∑INT:SOLVE SOLVE ∑IN = -46459.97

Answer = RM46459.96 interest paid after 3 years

 Amortization
7. For a 20-year housing loan of RM200,000 at an interest rate of 8%
(monthly rest), compute the:
a) Total Principal paid after 3 years

AMRT PM1 = 1
PM2 = 36
PV = 200000
N = 240
i = 0.667%
PMT = -1672.88

∑PRN:SOLVE SOLVE ∑PR = -13763.72

Answer = RM13763.71 principal paid after 3 years

Don’t Believe?