1
Time Value of Money
Q1. What will be the growth (maturity value) of an investment
of ₹ 25,000 in 5 years when the simple rate of interest is 9.5%
p.a. for 3 year and above
Q2. A fixed deposit receipt has a maturity value of ₹ 136000
What is the amount at which fixed deposit receipt has been
initially purchased if simple interest rate is 12% p.a. and the
maturity period is 3 years?
Q3. An investment has a maturity value of ₹ 330000 and was
initially purchased 4 years back for ₹ 250000. Calculate simple
interest rate p.a.
Q4. Calculate the compound interest on ₹ 15,000 for 3 years at
10% compounded annually.
Q5. Calculate the terminal value of an amount of ₹ 1,00,000 after
5 years at 14% interest compounded annually.
Q6. Calculate the compound interest on ₹ 10,000 for a year at
9% if compounding is done
(A) Annually
(B)Semi Annually
(C ) Quarterly
(D) Monthly
Q7. Calculate the compound interest on ₹ 2,000 for 2 years at
10% compounded annually, bi-annually, quarterly and
monthly
2
Q8. Calculate the compound interest on ₹ 12,000 for 3 years at
10% compounded annually, bi-annually, quarterly and
monthly
Q9. Calculate the maturity value of a deposit of ₹ 20000 after 4
years if the quarterly compounded annual interest is (i) 10%;
(ii) 20% and (iii) 100%
Q10. If the interest is 12% p.a payable quarterly, find the
effective rate of interest.
Q11. If the interest is 10% payable monthly, find the effective
rate of interest.
Q12. Calculate the present value of an investment for 5 year with
the following returns, if the expected return is 10%
Returns
Year (₹)
1 30000
2 32000
3 37000
4 40000
5 42000
Q13. Calculate the present value of an investment for 8 year with
the following returns if the expected return is 15%
3
Cash
Inflows
Year (₹)
1 120000
2 140000
3 150000
4 130000
5 145000
6 160000
7 170000
8 110000
If the initial investment was ₹ 5,00,000, would you recommend
to investment in this investment avenue.
Q14. Following are the cash inflows from an investment proposal
for 6 years:
Year Cash Flow
1 240000
2 260000
3 350000
4 380000
5 310000
6 280000
Determine whether it is advisable to invest if the initial
investment is ₹ 10,00,000
(a) if the expected rate of return is 15%
(b) if the expected rate of return is 20%
Q15. A investment promises to give you ₹ 11,00,000 after 3 years
If you deposit ₹ 8,50,000. If your expected rate of return is
9.5%, is the investment proposal worth investing?
4
Year DF @ 9.5%
1 0.913
2 0.834
3 0.762
Q16. Suppose you expect to receive ₹ 8000 annually for 3years,
each receipt occurring at the end of the year. What is the
present value of this stream of benefits if the discount rate is
10%?
Q17. Suppose you expect to receive ₹ 5000 annually for 5years,
each receipt occurring at the end of the year. What is the
present value of this stream of benefits if the discount rate is
8.5%?
Q18. Determine whether it is advisable to invest in an investment
proposal with an initial investment of ₹ 10,00,000, which is
recovered at the end of 5th year. The cost of capital is 14%.
and the cash flows are as follows:
Year Cash Flow
1 50000
2 90000
3 140000
4 160000
5 200000
Q19. An individual has borrowed ₹ 12,00,000 from housing loan
department of SBI at 12% repayable in 10 years at the end of
each year. Show a repayment schedule.
5
Q20. An individual has borrowed ₹ 12,00,000 from housing loan
department of SBI at 12% repayable in 10 equal annual
instalments at the end of each year. What is the amount of
equated annual instalment? Also show the repayment
schedule.
Q21. An individual borrowed ₹ 38,00,000 from housing loan
department of SBI at 14% repayable in 8 equal annual
instalments at the end of each year. What is the amount of
equated annual instalment? Also show the repayment
schedule. PVAF @ 14% for 8 Years is 4.6389
Q22. Mr. Ravi deposits ₹ 2,00,000 at the end of every year in a
bank for 5 years. The deposit earns 10% p.a. what is the future
value of this annuity at the end of 5 years?
Q23. Mr. Ravi deposits ₹ 2,00,000 annually in a bank for 5 years.
The deposit earns 10% p.a. what is the future value of this
annuity at the end of 5 years?
