1. Suppose that you wish to have Rs 20,000 saved by the end of five years. And suppose you deposit funds today in an account that pays 4% interest, compounded annually. How much must you deposit today to meet your goal?

2. If you want to have Rs 10,000 in 3 years and you can earn 8% interest, how much would you have to deposit today?

3. If a commodity costs Rs500 now and inflation is expected to go up at the rate of 10% per year, how much will the commodity cost in 5 years?

4. What is the balance in an account at the end of 10 years if Rs 2,500 is deposited today and the account earns 4% interest, compounded annually? Quarterly?

5. If you deposit Rs10 in an account that pays 5% interest, compounded annually, how much will you have at the end of 10 years? 50 years? 100 years?

6. How much will be in an account at the end of five years the amount deposited today is Rs 10,000 and interest is 8% per year, compounded semi-annually?

Identify if these statements are correct

1 a) A bank that pays 10.5 percent interests compounded annually provides a higher effective rate of interest than a bank that pays 10 percent compounded semi-annually.

1 b) The present value interest factor for annuity is equal to the product of the future value interest factor for annuity and the present value interest factor.

1 c) One of the reasons for attributing time value to money is that individuals prefer future consumption to current consumption.

Select the right answer

a) Given an investment of Rs 1,000 to be invested for 9 months and interest is credited annually
a. It is better to -invest in a scheme, which earns compound interest at 12%.
b. It is better to invest in a scheme, which earns simple interest at 12%.
c. It is better to invest in a scheme, which earns simple interest at 15%.
d. It is better to invest in a