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Module 3-Practice Questions

The document contains a series of practice questions related to the time value of money, including calculations for simple interest, present value, future value, and annuities. It covers various scenarios involving different interest rates and compounding methods. Each question is assigned a specific mark value, indicating its complexity and importance in understanding the concepts.

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16 views3 pages

Module 3-Practice Questions

The document contains a series of practice questions related to the time value of money, including calculations for simple interest, present value, future value, and annuities. It covers various scenarios involving different interest rates and compounding methods. Each question is assigned a specific mark value, indicating its complexity and importance in understanding the concepts.

Uploaded by

khanevilmind99
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Module 3: Time value of money and related concepts

Practice questions (3 and 5 marks)

Question #01

Suppose you gets a loan of Rs. 500,000 at 12% simple interest rate for 10 years from a
bank. What will be total interest you will pay to bank and what will be the total payable
amount? 3 marks

Question #02

What will be the present value of Rs. 10,000 to be received after 5 years, if interest rat is
12% compounded semi-annually. 3 marks

Question #03

What will be present value of Rs. 70,000 to be received after 4years. Assume an interest
rate of 10% compounded monthly. 3 marks

Question #04

What will be the Future value of Rs. 10,000 after 5 years, if interest rat is 12%
compounded quarterly. 3 marks

Question #05 (5 marks)

Calculate and compare present values of following two investment plans and decide
which will be feasible for you and why?

Plan A: Rs. 50,000 to be received after 10 years, if interest rat is 10% compounded
semi-annually.

Plan A: Rs. 50,000 to be received after 10 years, if interest rat is 10% compounded
annually.
Question #06 (5 marks)
Calculate Present Value of the following series of cash flows if discount rate is 15%.

Year Cash flow (Rs.)

1 100,000
2 -70,000
3 250,000
4 -180,000

Question #07 (5 marks)

Option1: Deposit Rs. 500,000 today at 10% annual rate compounded semi-annually.

Option 2: Deposit Rs. 350,000 today at 12% rate compounded annually.

Required:

a) Calculate the future value of both options if investment is made for 5 years.

b) Which option will you prefer and why?

Question #08

What will be future value of an ordinary annuity if annual payment is Rs. 5000 for 10 years at
an annual interest rate of 8%. 3 marks

Question #09

What will be future value of annuity due if annual payment is Rs. 8000 for 5 years at an
annual interest rate of 10%. 3 marks

Question #10 (3 marks)

Calculate the present value of an ordinary annuity if:


Annual payment: Rs. 3000
Number of years: 10
Interest rate: 15% per annum
Question #11(3 marks)

Calculate the present value of an annuity due if:


Annual payment: Rs. 3500
Number of years: 5
Interest rate: 10% per annum

Question #12 (3 marks)


What will be present value of a perpetuity of Rs. 2000 per year at 12% annual interest rate?

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