c.f Case Presentation on Time Value of Money

7/29/2019 c.f Case Presentation on Time Value of Money

1/9

CASE PRESENTATION ON TIMEVALUE OF MONEY

Presented by :-

Jagmohan Pattnaik (12202081)

Khusboo Pradhan (12202082)

Madhurima Kiran (12202083)Manrit Kaur Gill (12202084)

Matiur Siddiqui (12202085)

Monalika Pasayat (12202086)


2/9

Q NO.1 WHATISTHEAMOUNTTHATNEEDTOBEDEPOSITEDNOWINTHE

RECURRINGDEPOSITACCOUNTINTHEBEGINNINGOFEACHMONTHTO

GETTHEAMOUNTNEEDEDINTHE 10 THYEAR.

Given ,

PV = Rs 20,00,000

r (inflation rate) = 5 %

n = 10 yearsNow we have calculate the FV (Future value)

FV= PV*(1+r)^n

= Rs 20,00,000 * (1+ 0.05)^10

= Rs 20,00,000 * (1.05)^10

= Rs 20,00,000 * (1.63)

= Rs 32,60,000

For this future value he wants to open a recurring deposit accounton which interest rate is 8 % p.a for 10 years compoundedquarterly.

20 lakh ?0 10


3/9

As given

n = 10*12 = 120 months

r(interest on recurring deposit) = 8 % p.a

r = 8/4 =2% per quarter

= 2/3 = 0.67% = 0.0067FVA = A* [{(1+ r )^n-1}/r ]

=> Rs 32,60,000 = A* [{1+ 0.0067)^120-1}/0.0067 ]

=> Rs 32,60,000 = A*[{ 1.0067)^120-1} / 0.0067]

=> Rs 32,60,000 = A*[2.23-1 / 0.0067]

=> Rs 32,60,000 = A* [183.58]=> A = Rs 32,60,000 / 183.58

=> Rs 17,757.93

So, amount needed to be deposited in recurring accountis Rs.17,757.93

17757.93 17757.93

0 1 2 4 5 6 7 8 9 10


4/9

(Q2)WHATISTHEAMOUNTTHATNEEDTOBEDEPOSITEDNOWIN

THERECURRINGDEPOSITACCOUNTINTHEBEGINNINGOFEACH

MONTHTOGETTHEAMOUNTNEEDEDIN 11THYEAR?

Given:

PV = Rs.25,00,000/-

r( inflation rate)=5%n=11 years

FV=PV*(1+r)^n

=>FV=2500000*(1+0.05)^11

=>FV=Rs.4275848.39/-For this future value he wants to open a recurring depositaccount on which interest rate is 8%p.a for 10 yearscompounded quarterly.

0 25 lakh 11 ?


5/9

As given

n=11x12=132 months

r(interest on recurring deposit)=8%p.a.

=8/4=2% per quarter

=2/3=0.67%=0.0067

FVA = A * [{(1+r)^n-1}/r]

=>4275848.39 = A * [{(1+0.0067)^132-1}/0.0067]

=>4275848.39 = A * (1.41/0.0067)

=>4275848.39 = A * 211.10

=>A = 4275848.39/211.10 =Rs.20255.08/-

So , amount needed to be deposited in recurring accountis Rs.20255.08/-

20255.08 20255.08 .

0 1 2 3 4 5 6 7 8 9 10 11


6/9

Q- 3 What is the amount that needs to be deposited now in the

cumulative fixed deposit of meeting the cost ofJasleens (Kartars

daughter) marriage after 20years at the rate of 8% per annum

(compounded quarterly)??

Given that an amount of Rs. 3 crores would be needed for

Jasleens marriage after 20 years.

Future Value (FV)= Rs 3 crores,

Interest Rate on fixed deposit (r)= 8% = 0.08,

Number Of Years (n)= 20 years and

Number Of Compounding(quarterly) in a year (m)= 4

FV = PV* [1 + (r/m)]^mn

3,00,00,000 = PV *[1 + (0.08/4)]^4x203,00,00,000 = PV* [1 + 0.02]^80

3,00,00,000 = PV* [1.02]^80

3,00,00,000 = PV* [4.88]

PV = 3,00,00,000/4.88 = Rs 61,47,540.984

This is the amount which need to deposit in term deposit now.

0 203 crore?


7/9

Q- 4- WHAT IS THE AMOUNT THAT NEED TO BE DEPOSITED NOW IN

THE CUMULATIVE FIXED DEPOSIT WITH THE BANK FOR

PURCHASING ANNUITY DUE FROM AN INSUARANCE COMPANY??

After taking inflation into consideration this will be the case of growing annuity.

PV of growing annuity = A (1+g) {1-[(1+g)^n/(1+r)^n]/(r-g)}

= 12,00,000(1 + .05) {1- [(1+0.05)^10/(1+0.10)^10]/(0.10-0.05)}

= 12,60,000 {1- [(1.05)^10/(1.10)^10] / (.05)}

= 12,60,000 {(1- [ 1.63/ 2.60]) / .05}

= 12,60,000 { (1-0.628) / 0.05}

= 12,60,000 {0.372 / 0.05}

= 12,60,000 x 7.44= Rs 93,74,400.

This is the amount needed to purchase the annuity due from the insurance

company. For this purpose he need to open a term deposit account whose

future value is Rs 9374400.

|________________________|____|______|______|__________________

_|0 10 12 lac 12x1.05 20

(inflation rate)


8/9

FV= PV* ( 1 + r/m)^mn

93,74,400 = PV *(1 + 0.08/4)^4x10

93,74,400 = PV *(1 + 0.02)^40

93.74,400 = PV *(1.02)^4093,74,400 = PV * 2.21

PV = 93,74,400 / 2.21

PV = Rs 42,41,809.95

Therefore it need to deposit Rs 4241809.95 in the

cumulative term deposit now @ 8 % for 10 years.

0 10

Rs 9374400


9/9

THANK YOU

c.f Case Presentation on Time Value of Money

Documents

Transcript of c.f Case Presentation on Time Value of Money