Time

Value of Money

I. You have Rs. 56,478 as on today. How much you will get in return if the sum is invested in
a scheme paying 16% simple interest for 3 years?

II. You have Rs. 5,78,500 as on today. How much you will get in return if the sum is invested
in scheme paying 11% compounding interest for 2 years?

III. If you are getting Rs. 78,457 after 4 years by investing in a scheme which is paying you
compounding interest @ 9%; how much should be the initial investment?

IV. If you are getting Rs. 9,12,800 after 3 years by investing in a scheme which is paying you
compounding interest @ 6%; how much should be the initial investment?

V. If a scheme is paying you thrice of your investment as accumulated return over 8 years,
does it paying you more than 8%?

VI. If a scheme is paying you twice amount of original investment in 5 years what is the rate of
return at which you are investing? [Approximate Answer is allowed]

VII. If a scheme is paying you 150% of amount of original investment in 4 years what is the rate
of return at which you are investing? [Approximate Answer is allowed]

VIII. You have Rs. 5 Lakh to invest. Scheme of X Ltd. is paying you Rs. 8 Lakh after 3 years.
Scheme of Y Ltd. is paying Rs. 10 Lakh after 5 years. Scheme of Z Ltd. is paying Rs. 20 Lakh
after 12 years. Compute which scheme is most beneficial and find out approximate interest
rates of each scheme.

IX. You have invested your funds with different investment opportunities. X Ltd. will pay you
Rs. 10 Lakh after 3 years, Y Ltd. will pay you Rs. 12 after 6 years and Z Ltd. will pay you Rs.
15 Lakh after 8 years. Find out initial investment amount. And also suggest which is best
investment option by considering interest rate.

X. You have Rs. 1 Crore to invest find out when you will get highest returns in following
cases:

a. Investing it at 6% under compounding interest for 5 years.

b. Investing it at 10% under compounding interest for 3 years.
c. Investing it at 14% under simple interest for 5 years.

XI. Which rate of return guarantees you four times of you investment in 18 years?

XII. If your friend borrows from you @ 5% on compounding rate of interest, Rs. 3 Lakh on
today; how much he will repay after 7 years?
XIII. If your friend is borrowing from you on today a sum of Rs. 6 Lakh on compounding
interest and offering you to return Rs. 8 Lakh after 6 years or Rs. 9 Lakh after 8 years
which option you should select?

XIV. If your friend is borrowing from you on today a sum of Rs. 25 Lakh on compounding
interest and offering you to return Rs. 40 Lakh after 8 years or Rs. 48 Lakh after 12 years
which option you should select?

XV. If commodity ‘X’ costs you Rs. 1,56,000 on today, how much it will cost you after 3 years if
annual inflation on compounding basis is 9%?

XVI. If commodity ‘X’ costs you Rs. 2,00,000 on today, how much it will cost you after 5 years if
annual inflation on compounding basis is 14%?

XVII. If you have Rs. 4 Lakh on today and wishes to purchase a car costing Rs. 8 Lakh; it is not
possible. But if you invest it in a scheme that pays you compounding interest @ 16% for 10
years; are you able to purchase the car at the end of 10th year if the inflation rate is 7%?

XVIII. You have excess fund to invest. If you lend it to Mr. F, the friend he will pay you Rs. 12
Lakh after 7 years on compounding rate of 6%. Find out the present value of investment to
that return.

XIX. What is the present value of Rs. 12 Lakh earned under F.D. after 12 years if bank is paying
me 12% interest?

XX. What is the present value of commodity ‘Q’ which will cost you Rs. 45,780 after 4 years if
inflation rate is 6% compounding?

XXI. What is the present value of investment made in Fixed Deposit of Axis Bank, which will pay
me Rs. 16 Lakh after 4 years, under 5% rate of interest?

XXII. Compute the present value of following investment plans:

a. Investing in a scheme of compounding interest which will pay Rs. 30 Lakh after
6 years.

b. Investing in F.D. of Dena Bank; which will pay you Rs. 40 Lakh after 9 years.

c. Investing in Public Deposits of ‘A’ Ltd.; which will pay you Rs. 38 Lakh after 8
years.

d. Lend it to your friend who will repay Rs. 15 Lakh thrice at the end of every 3rd
year from today.

e. Lend it to your brother in law; who will repay Rs. 10 Lakh after 6 years and Rs.
50 Lakh at the end of 10th year.

f. Invest it in deposits of ‘P’ Ltd., which will pay annual return of Rs. 4 Lakh for
next 10 years.

F.M. : Present Value calculations

PVIF = Present Value Interest Factor i.e. Discounting Factor i.e. 1 / [(1+ r/100) n ]

PVIFA = Present Value Interest Factor of an Annuity i.e. Compounding Factor (1+
r/100) n

A = P the annuity * [PVIFA i.e. Annuity Factor] i.e