Question 1:
Mr Smart desires to buy a Blackberry costing Rs8000. He is willing to wait a year to get it. The bank pays 10% annual interest compounded monthly. How much money should Mr Smart put aside each month starting at the start of this one, to buy the Blackberry at the end of year.
Question 2:
You’ve just celebrated your twentieth birthday and you think you will spend Rs120, 000 on your 60th birthday and the same amount on each of upcoming 9 birthdays. If the interest rate is 10% per annum, how much must you save each year, supposing that annual savings start on the eve of your 21st birthday, till retirement to support your consumption pattern after retirement?
Question 3:
A Mauritian couple living in England plans to pay their child’s tuition fees for 4 years starting 18 years from now. The recent annual cost of university is £7,000, and they anticipate this cost to rise at an annual rate of 5%. In their planning, they suppose which they can earn 6% yearly. How much must they put aside each year, starting upcoming year, if they plan to make 17 equal payments.
Question 4:
You are encountered with a choice between two investments, A and B. Investment A is expected to generate Rs1, 000 every year till perpetuity. Investment B is also perpetuity and will generate a cash flow of Rs800 in year 1 which will grow at a constant rate each year forever. If your required rate of return is 10% per annum, what rate of raise in Investment B’s cash flows is essential to make it as desirable as Investment A.?
Question 5:
On 1 January 2011, Rs500, 000 was borrowed by the Mr Needy from bank for a period of 10 years at a fixed annual rate of interest of 12%. Mr Needy will reimburse interest and principal by equivalent annual payments. Compute the annual payment the first annual payment is effected on 31 December 2011.