Time Value Of Money

Question 1

Amount of interestSI

Answer 1

Pit
Principal
Annual interest rate in decimel
Time in years

Question 2

Final value of an investment SI

Answer 2

P(1+it)

Question 3

CI

Accrued amount
Interest

Answer 3

A = P(1+i)^n

I = Annual rate of interest/number conversions periods per year

Interest = P [(1+i) ^n -1]

n is total conversions = t× no.of conversions per year

Question 4

Effective rate of interest

Answer 4

E = (1+i)^n -1

Question 5

Effective rate of interest

Answer 5

E = (1+i)^n -1

Question 6

Ordinary Annuity

1. Annuity to PV
2. PV to Annuity

Answer 6

1. R/100+1 / (=) [No. of Installments] GT x a => PV
2. R/100 +1 /(=) [No. of installments] GT [M+] , TYPE PV / MRC = a

I = R / No. of conversions

Use 100 for annual
200 for semi annual
400 for Qtrly
1200 for monthly compounding

Question 7

Annuity Due or Immediate

1. Annuity to PV
2. PV to Annuity

Answer 7

1+=R/100+1/(=) [n-1] GT x a => PV

1+=R/100+1/(=) [n-1] GT [M+] => PV/MRC => a

Question 8

Future Value

Annuity Regular

1. Annuity to FV
2. FV to Annuity

Answer 8

1. 1+= R/100 +1 x 1 (=) [n-1] GT x a => FV
2. 1+=R/100+1 x1 (=) GT [M+] => Type PV /MRC => a

Question 9

Annuity Due or Immediate

1. Annuity to FV
2. FV to Annuity

Answer 9

R/100 +1 x 1 (=) [n] GT x a = FV

R/100 +1 x 1 (=) [n] GT [M+] => FV/MRC = a

n = t x No.of conversions

Question 10

Future value of single cash flow

Answer 10

F = Cash flow (1+i)^n

Question 11

Annuity regular FV

Answer 11

A[(1+i)^n -1/i]

Question 12

Annuity FV immediate

Answer 12

Regular annuity x (1+i)

Question 13

Present value of annuity single cash flow

Answer 13

A = P(1+i)^n

Question 14

Present value of annuity regular

Answer 14

V = A [(1+i)^n -1/i(1+i)^n]

Question 15

Present value of annuity Immediate

Answer 15

PV of annuity regular + initial cash payment or recepit