Question on Time Value of Money
Q1. What is the Future Value of ₹ 2,00,000 invested today, if it earns 10% interest for one year?
Q2. What is the Future Value of ₹ 2,00,000 invested today, if it earns 10% interest for two years?
Q3.What is the future Value of ₹ 6,00,000 invested today, if it earns 8.5% interest for Seven years?
Q4. Mr X wants 40,00,000 at the end of 3 years, if an investment offers 8% p.a. rate of interest, how much
should be invested today.
Q5. Ravi needs Rs 20,00,000 at end of 5 years to buy a car, rate of interest on FD is 7% pa. By what amount
he should book his FD today?
Q6. What is the balance in an account at the end of 5 years if Rs 25000 is deposited today and the account
earns 4% interest, compounded
Case 1 annually? ;Case 2 semi-annually?;Case 3 quarterly?;Case 4 Monthly?
Q7. How much will be in an account at the end of five years the amount deposited today is Rs 100,000 and
interest is 8% per year, compounded semi-annually?
Q8. Suppose you want to have 5,00,000 saved by the time you reach age 30 and suppose that you are 20 years
old today. If you can earn 5% on your funds, how much would you have to invest today to reach your goal?
Q9. How much would I have to deposit in an account today that pays 12% interest, compounded quarterly, so
that I have a balance of Rs 20,000 in the account at the end of 3 years?
Q10. Suppose I want to be able to withdraw Rs 50,000 at the end of five years and withdraw Rs 60,000 at the
end of six years, leaving a zero balance in the account after the last withdrawal. If I can earn 5% on my
balances, how much must I deposit today to satisfy my withdrawals needs?
Q11. Kumar needs Rs 1400,000 by end of 2 years, he has three options for investment. Which option he should
select.
• Option 1: Invest in Mutual fund giving return of 12.5% pa compounded annually.
• Option 2: Invest in FD giving return of 11% compounding quarterly.
• Option 3: Invest in FD giving return of 12% compounding monthly.
Q12. Kritika won a Quiz competition and won Rs 50,000 in that, now she is planning to invest this money for
5 years but confused which investment opportunity will give her maximum return.
• Option 1: invest in Nifty index fund, which can give return of 13% compounded annually
• Option 2: invest in FD for 5 years @ 12% compounded semi-annually.
• Option 3: Invest in FD for 3 years @ 14% and then after 3 years invest in another FD for 2 years @
11% compounding annually in both the FDS.
You are a Financial Analyst, so you have to guide her which Option is best.
