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FM Module 2 Exercise

1. The document contains exercises related to financial management concepts such as time value of money, future value, loan amortization schedules, sinking funds, present value, perpetuities, and retirement options. 2. Questions ask the learner to calculate future values with compound interest, set up loan repayment schedules, determine sinking fund deposit amounts, evaluate investment options based on present value, and choose optimal retirement payout structures. 3. Financial calculations include compound interest, present and future value, perpetuities, and amortization tables.

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Prayag Gokhale
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46 views

FM Module 2 Exercise

1. The document contains exercises related to financial management concepts such as time value of money, future value, loan amortization schedules, sinking funds, present value, perpetuities, and retirement options. 2. Questions ask the learner to calculate future values with compound interest, set up loan repayment schedules, determine sinking fund deposit amounts, evaluate investment options based on present value, and choose optimal retirement payout structures. 3. Financial calculations include compound interest, present and future value, perpetuities, and amortization tables.

Uploaded by

Prayag Gokhale
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Financial Management

Module 2 Exercise

1) What is time value of money?


2) What will be the future value of Rs 10000 invested for 4 years @ 12 %? If compounded
quarterly and monthly.
3) Suppose a firm borrows Rs1000000 at an interest rate of 15% and the loan is to be repaid
in 5 equal installments payable at the end of each of next 5 years. Prepare loan
Amortization schedule.
4) XYZ ltd., has Rs. 10 crores bonds outstanding. Bank deposits earn 10% p.a the bonds
will be redeemed after 15 years for which purpose the company issues to create a sinking
fund. How much amount should be deposited to the sinking fund each year so that XYZ
ltd, would have in the sinking fund rs.10 crore to retire its entire issue of bonds?
5) You are given an option to receive Rs 100000 at the end of each year for 5 years or to
receive lump sum of Rs 600000 after five years. Which option you will prefer. If
expected rate of return is 10 %.
6) Assume that a deposit is to be made at year zero into an account that will earn 8%
compounded annually. It is desired to with draw Rs.5000 three years from now and Rs.
7000 six years from now. What is the size of the years zero deposit that will produce
these future payments?
7) Find out the present value of an investment which is expected to give return of Rs. 2500
p.a. indefinitely and the rate of interest is 12% p.a.
8) A finance company makes an offer to deposit a sum of Rs. 1100 and then receive return
of Rs. 80 p.a. perpetually. Should this offer be accepted if the rate of interest is 8%? Will
the decision change if the rate of interest is 5%?
9) A bank finance a car purchase up to 250000 at 12% interest per annum, for a period of 5
yrs. How much equate monthly installments can be fixed in this case?
10) An executive is about to retire at the age of 60. His employer has offered him two post
retirement options. a) 2000000 lump sum b) 250000 Rs. for 10 years. Assuming 10%
interest, which is a better option.
11) Mr. Raja requires 10 lakhs after years 10 years. He considers the following 2 option. a)
To invest a single amount of 10% rate b) To invest annually at a rate of 10%
compounded annually

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