Time Value of Money

namratatwr94
Posts: 6
Joined: Mon Apr 10, 2017 4:44 am

Time Value of Money

Postby namratatwr94 » Fri Jun 02, 2017 8:31 am

Please find the question in the attachment. The answer of this question is not provided in Edupristine's study material PPT.
I got the following answers:
a) 13,628.64
b) 3780.72
Please confirm if these are correct.
Attachments
Doubt 1.pdf
(169.64 KiB) Downloaded 52 times

edupristine
Finance Junkie
Posts: 873
Joined: Wed Apr 09, 2014 6:28 am

Re: Time Value of Money

Postby edupristine » Wed Jul 19, 2017 3:20 pm

1) X ( 1 + r^5) = 30,000
Solving for x, we get amount to be invested today as 17,022.81
2) Now this is the present value if you want 30,000 at the end of year five. Using annuity formula, solving for payment we get, every year (assuming end of year deposit), 4,722.29 should be deposited to get 30,000 at the end of five years

abhinav0131
Posts: 1
Joined: Wed Apr 19, 2017 8:35 am

Re: Time Value of Money

Postby abhinav0131 » Thu Aug 03, 2017 4:20 pm

@edupristine, your answer is not correct, you are assuming that no interest is earned after 5 years, make it specific in the question if that is the case.

edupristine
Finance Junkie
Posts: 873
Joined: Wed Apr 09, 2014 6:28 am

Re: Time Value of Money

Postby edupristine » Fri Aug 04, 2017 11:45 am

You are correct. The solution problem doesn't include interest being earned after retirement.

If interest of 12% is going to be earned after retirement also, then the solutions provided by you in the question itself are correct.
1) 13,629 and
2) 3,780

namratatwr94
Posts: 6
Joined: Mon Apr 10, 2017 4:44 am

Re: Time Value of Money

Postby namratatwr94 » Thu Sep 14, 2017 5:45 am

@edupristine thanks for the clarification!!


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