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knowledge bank -basic learning Time Value of Money

Q1.You have a choice of receiving Rs. 25,000, six years from now or Rs. 50,000, twelve years from now. At what implied annual interest rate should you be indifferent between the two ?

Q2.You borrow Rs. 10,000 at 14 percent compound annual interest for four years. The loan is repayable in four equal annual installments payable at the end of each year. What is the annual payment that will completely amortize the loan over four years?

Q3.Niranjan wishes to purchase an annuity contract that shall pay him Rs. 7,000 a year for the next 20 years. The company to whom Niranjan approaches imputes a compound annual interest of 6 percent in the annuity contracts. How much will Niranjan pay for this annuity?

Q4.You are entitled to receive Rs. 1,000 every alternate year end, starting two years from now to the next 20 years. At 10% compound annual interest, what is the present value of this receipt?

Q5.Ram is considering two different saving plans, The first plan would have him deposit Rs. 500 every 6 months and he would receive interest at an annual rate of 7%, compounded semiannually. Under the second plan he would deposit Rs. 1000 every year with a rate of interest of 7.5% compounded annually. The initial deposits will be made six months and one year from now respectively. Which plan is better? (at the end of ten years).


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