INTRO TO FINANCIAL

MANAGEMENT

NOVEMBER 6, 2019
SUBMITTED BY: -AFAQ BIN QAISAR BSCS(A) 5TH 17-ARID-524
SUBMITTED TO:MAM NAZISH
Q1. What will 247,000 grow to be in 9 years if invested today in an annual
compounding with interest rate of 11%?
Solution: -

Given: To Find:- FV=?

P0=247,000 Formula`s:-
i=11% FV= Po(1+i)n
n=9 FV= Po(FVIAi,n)through table 1
FV= Po(1+i)n FV=Po(FVIAi,n)
FV=2,47,000(1.11)9 FV=2,47,000(2.558)
FV=2,47,000(1.11) FV=631826
FV=631826

Q2. At 9% discounting what amount to be invested so that it will grow to be

475,000 in 14 years?
Solution: -

Given: To find:-P0=?
i=9% Formula`s:
n=14 years PV or Po=FV(1/(1+i)n)
FV=475,000 PV=FV(PVIFi,n) through table 2
Po=FV(1/(1+i)n) PV=FV(PVIFi,n)
Po=475,000(1/(1+0.09)14) PV=47000(PVIF9%,14)
Po=475,000(1/(1.09)14) PV=47000(0.299)
Po=475,000(1/(3.3417) PV=142025
Po=142025
PV=142025
Q3. What will 153,000 grow to be in 13 years if it is invested today in an
account with a quoted annual interest rate of 10%?
Solution: -

Given:- To find:-FV=?
P0=153,000 Formula`s:-
i=10% FV=Po(1+i)n
n=13 FV=Po(FVIA) through table 1
that FV=Po(1+i)n FV= Po(FVIFi,n)
FV=21,53,000(1.1)9 FV=153000(PVIF10%,13)
FV=1,53,000(3.452) FV=153000(3.452)
FV=528156 FV=528156

Q4. Suppose 5000 is deposited in an account that earns compound interest

that is done annually if there is 7000 in the account after 2 years, what is the
annual interest rate?
Solution: -

Given: To find:-i=?
P0=5,000 Formula`s
n=2 FV=Po(1+i)n
FV=7000
FV=Po(1+i)n
7000=5,000(1+i)2
7000/5000=(1+i)2
1.4=(1+i)2
1.183=1+i
1.183-1=i
i=0.18
i=18%
Q5. An investment of 5500 amounted to 8000 after 4 years of compound growth. What is
the annual rate of growth?

Solution: -

Given:- To find:-
P0= 5,500 i=?
n=4 Formula`s:-
FV=8000 FV=Po(1+i)n
FV=Po(1+i)n
8000=5,500(1+i)4
8000/5500=(1+i)4
1.545=(1+i)4
1.098=1+i
1.098-1=i
i=0.098
i=9.8%

Q6. You are offered an annuity that will pay 24,000 per year for 11 years. If
you feel that the appropriate discount rate is 13%. What will be the annuity
worth to you today?
Solution: -
Given:- To Find:-
i=13% PVA=?
R=24000 PVA=R[(1-1/(1+i)n)]/i
n=11
PVA=R[(1-1/(1+i)n)]/i
PVA=24,000[(1-1/(1+0.13)11)]/0.13
PVA=24,000[(1-1/(1.13)11)]/0.13
PVA=24,000[(1-1/(3.83586)]/0.13
PVA=24,000[1-0.606977]/0.13
PVA=24,000[0.7393]/0.13
PVA=24,000(5.68694)
PVA=136.486.56
Q7. If you deposit 16,000 per year for 12 years in an amount that pays an
annual compound interest rate of 14%. What will your account be worth at
the end of the 12 years?
Solution: -

Given:- To find:-
i=14% FVA=?
R=16000 FVA=R[((1+i)n-1)/i]
n=12
FVA=R[((1+i)n-1)/i]
FVA=16000[((1+0.14)12-1)/0.14]
FVA=16000[((1.14)12-1)/0.14]
FVA=16000[((4.8179-1)/0.14]
FVA=16000[3.8179/0.14]
FVA=16000(27.270794)
FVA=436331.9794
Q8. An annuity worth today is 190,000. What amount of annuity you are
responsible to pay for 20 years if the appropriate discount rate is 17%? Find
that Amount Annually, Semi-Annually, Quarterly, and Monthly
Solution: -

Given:- To find:-
PVA=190,000 i) Annually
i=17% ii) Semi-monthly
n=20 iii) Quarterly
iv) Monthly

Annually Semi-monthly
PVA=R[(1-1/(1+i)n)]/i n*2=40 & i/2=0.085
190,000=R [(1-1/(1+0.17)20)]/0.17 PVA=R[(1-1/(1+i)n)]/i
190,000=R [(1-1/(1.17)20)]/0.17 190,000=R [(1-1/(1+0.085)40)]/ 0.085
190,000=R [(1-1/(23.105599)]/0.17 190,000=R [(1-1/(1.085)40)]/ 0.085
190,000=R [1-0.04327955]/0.17 190,000=R [(1-1/(26.133)]/0.085
190,000=R [0.9567]/0.17 190,000=R [1-0.03826577]/0.085
190,000=R (5.627767) 190,000=R [0.961734]/0.085
R(Annually)=33761.17 190,000=R(11.31452)=>
R(Semi-annually) =16792.58168
 Monthly Quarterly
n*12=240 n*4=80
i/12=0.014166 i/4=0.0425
PVA=R[(1-1/(1+i)n)]/i PVA=R[(1-1/(1+i)n)]/i
190,000=R [(1-1/(1+0.014166)240)]/ 0.014166 190,000=R [(1-1/(1+0.0425)80)]/ 0.0425
190,000=R [(1-1/(1.014166)240)]/ 0.014166 190,000=R [(1-1/(1.0425)80)]/ 0.0425
190,000=R [(1-1/(29.253054)]/ 0.014166 190,000=R [(1-1/(27.9309)]/ 0.0425
190,000=R [1-0.034184]/ 0.014166 190,000=R [1-0.0358]/ 0.0425
190,000=R [0.9658155]/ 0.014166 190,000=R [0.964197]/ 0.0425
190,000=R (68.17842) 190,000=R (22.686997)
R(Monthly)=2786.80556 R(Quarterly)=8374.84

Q9. Suppose you borrow 1,000,000 at 15% annual interest to be repaid over
the next 5 equal annual installments. Equal installment payments are
required. Amortization table is required to show this schedule.
Solution: -

Given:-
n=5 PVA=R [(1-1/(1+i)n)]/i
i=15% 1,000,000=R [(1-1/ (1+0.15)5)]/ 0.15
PVA=1,000,000 1,000,000=R [(1-1/ (1.15)5)]/ 0.15
1,000,000=R [(1-1/ (2.0113571875)]/ 0.15
To Find:- 1,000,000=R [1-0.4971767]/ 0.15
R=? 1,000,000=R [0.5028232647]/0. 15
1,000,000=R (3.3521550)
R=298315.55
 Years Installment Annual Principal Principal amount

Payment Interest Payment At the end each

R 4t-1*i (1) -(2) Year 4t-1-(3)

0 - - - 1,000,000

1 298315.5524654 150,000 148315.5524654 851684.4475

2 298315.5524654 127752.667 170562.8853 681121.562

3 298315.5524654 102168.2343 196147.3181 484974.2423

4 298315.5524654 72746.13658 225569.41589 259404.828

5 298315.5524654 38910.7242 229404.828 0

Q10. Suppose you borrow 1,00,000 at 6% annual interest to be repaid over the
next 5 years’ equal installments. Equal installment payments are required and
amortization table is required to show this schedule.

Solution: -

Given:- To Find:-
n=5 PVA=R [(1-1/ (1+I)n)]/i
i=6% 1,00,000=R [(1-1 / (1+0.06)5)]/ 0.06
PVA=1,00,000 1,00,000=R [(1-1 / (1.06)5)]/ 0.06
1,00,000=R [(1-1/ (1.3382255776)]/ 0.06
1,00,000=R [1-0.747281729]/ 0.06
1,00,000=R [0.25274183]/ 0.06
1,00,000=R (4.212363785)
R=23739.64
Years Installment Annual Principal Principal amount

Payment Interest Payment At the end each

R 4t-1*i (1) -(2) Year 4t-1-(3)

0 - - - 1,00,000

1 23739.64 6,000 17739.64 82260.36

2 23739.64 4935.6216 18804.0184 63456.3416

3 23739.64 3807.3805 19932.2595 43524.0821

4 23739.64 2611.44493 21128.19505 22395.887

5 23739.64 1343.7532 22395.8868 0.000

=>22395.887