Financial Management Computer Practical
WORKSHEET 1 : TIME VALUE OF MONEY
1. Mr. X places his savings of ₹1,000 in a two-year time deposit scheme of a bank which
yields 6 per cent interest compounded quarterly. Make a comparison of Mr. X’s savings
at the end of two years when interest rate is compounded annually, half-yearly and
quarterly.
2. Ram deposits ₹55,650 in a bank, which was paying a 15 per cent rate of interest on a
ten-year time deposit, how much would the deposit grow at the end of ten years?
3. Suppose Mr. X deposits each year ₹500, ₹1,000, ₹1,500, ₹2,000 and ₹2,500 in his
savings bank account for 5 years. The interest rate is 5 per cent and compounding time
period is one year. Payment is made at the end of each year. Mr. X wishes to find the
future value of his deposits at the end of the 5th year.
4. Suppose a firm deposits ₹5,000 at the end of each year for four years at 6 per cent rate
of interest. How much would this annuity accumulate at the end of the fourth year?
5. Company XYZ is establishing a sinking fund to retire ₹5,00,000, 8 per cent debentures,
10 years from today. The company plans to put a fixed amount into the fund each year
for 10 years. The first payment will be made at the end of the current year. The
company anticipates that the funds will earn 6 per cent a year. What equal annual
contributions must be made to accumulate ₹5,00,000, 10 years from now?
6. Suppose an investor wants to find out the present value of ₹50,000 to be received after
15 years. The interest rate is 9 per cent.
7. The ABC company expects to receive ₹1,00,000 for a period of 10 years from a new
project it has just undertaken. Assuming a 10 per cent rate of interest, how much would
be the present value of this annuity?
8. Mr. X wishes to find out the present value of investments which yield ₹500 in
perpetuity, discounted at 5 per cent.
9. Mr. X plans to invest ₹10,000 today for a period of four years. If the interest rate is 10
per cent, how much income per year should he receive to recover the investment?
10. A limited company borrows from a commercial bank ₹10,00,000 at 12 per cent rate of
interest to be paid in equal annual end-of-year instalments. What would the size of
instalments be? Assume the repayment period is 5 years.
11. Suppose your friend has agreed to return your money in 4 consecutive instalments of
Rs, 1,000, 2000, 3000 and 3500. He will pay these instalments after 1, 2, 3 and 4 years
respectively from today. You want to know the present value of these cash flows, in
order to understand how much he has actually paid in current terms. Consider interest
rate as 10 per cent.
12. If an investor has an opportunity of receiving ₹1,000, ₹1500, ₹800, ₹1100 and ₹400
respectively at the end of one through five years. Find out the present value of this
stream of uneven cash flows, if the investor’s required interest rate is 8 per cent.
13. A company paid a dividend of ₹60 last year. The dividend stream commencing from year
one is expected to grow at 10 per cent per annum for 15 years and then end. If the
discount rate is 21 per cent, what is the present value of the expected series?
14. Mr. X borrows ₹70,000 from HDFC to buy a flat. He is required to mortgage the flat and
pay ₹11,396.93 annually for a period of 15 years. What interest rate would he be
paying?
15. Mr. X wishes to determine the rate of growth of the following stream of dividends he
has received from a company:
Year Dividend (per share)
1 ₹2.50
2 2.6
3 2.74
4 2.88
5 3.04
16. Using two-way data table, create the following tables in Excel for period ranging from 1
to 10 and rate from 1% to 10%
1. Factors for Compounded Value of a Given Amount i.e., CVF(r%,n)
2. Factors for Compounded Value of an Annuity i.e., CVAF(r%,n)
3. Factors for Present Value of a Future Amount i.e., PVF(r%,n)
4. Factors for Present Value of a Future Annuity i.e., PVAF(r%,n)
