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Disclaimer: Given definitions are cited from Investopedia.

The following 3 things are what will enable you to prevent that big dent in your pocket. Rest assured if you are knowledgeable about these concepts, you will be able to make an enlightened and knowledgeable decision regarding finances and discounts that are offered on various items on a daily basis.

What are NPV and PV?


“The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project.
NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield.

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“The current worth of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows. Determining the appropriate discount rate is the key to properly valuing future cash flows, whether they be earnings or obligations.
Also referred to as discounted value

What is EMI?

“A fixed payment amount made by a borrower to a lender at a specified date each calendar month. Equated monthly installments are used to pay off both interest and principal each month, so that over a specified number of years, the loan is paid off in full.”

What is Interest Rate?

“The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets. Interest rates are typically noted on an annual basis, known as the annual percentage rate (APR). The assets borrowed could include, cash, consumer goods, large assets, such as a vehicle or building. Interest is essentially a rental, or leasing charge to the borrower, for the asset’s use. In the case of a large asset, like a vehicle or building, the interest rate is sometimes known as the "lease rate". When the borrower is a low-risk party, they will usually be charged a low interest rate; if the borrower is considered high risk, the interest rate that they are charged will be higher.”

Let us take an example.

When it comes to savings, there are multiple options that are available. However, the most common ones are FDs and RDs. If you decide to go for an FD, how would you gauge what the best scheme is? How would you be able to judge if a scheme offering compounding on a Quarterly basis is better than one offering it on an Annual basis? What about the reverse situation? Would you be able to tell for certain which is better without your own set of prior calculations?

Let us take another example.

“The iPhone 5c and 5s just came with it an irresistible offer. In a move to make Apple iPhones more affordable for the general public, Reliance Communications announced that it will sell iPhone 5C and iPhone 5S on a 2-year contract basis with Equated Monthly Instalments (EMIs) and no down-payment.

With this scheme, Reliance will offer iPhone5C for an EMI of Rs 2,499 per month over a 24-month period and iPhone 5S at Rs 2,999 per month over the same period. This payment comes bundled with free unlimited calls and SMSes (local and STD across network), apart from zero cost for 3G data usage. There is also no charge on national roaming.”

So, when you are faced with a situation like this which is extremely hard to resist, what do you do? How do you know whether it is a good deal? After a month, do you think you might have regrets about your decision?

Well, worry not. We have the best solution for you considering the circumstances. To keep in mind the current economic situation and the needs and wants of the public, we have devised a simple model that will help in calculations at moments like these.

So based on my own calculations, I have discovered that the deal is actually extremely easy on the pocket. Reliance Communications has a deal of Rs.1499 that covers all the things mentioned above. But for just a bit more, you get an iPhone too along with the aforementioned! But another way of looking at it is given in the picture. I have decided to open an FD at 8% Interest for 24 months. I would’ve received Rs. 33, 166 at the end of it. As you can see, there are plenty of ways of looking at it.

So why don’t you go ahead and try it out for yourself. Maybe you’ll find yourself the owner of a brand new iPhone 5s tomorrow. Just remember to always do your own calculations prior to it!