Time value of Money:

1. Car choice is offering free credit on a Mercedes car of tk 20 lakh. You pay tk 5 lakh down and then the balance at the end of 2nd year tk 6 lac, 3rd year 4 lac, 4th year 3 lac and 5th year tk 2 lakh. On the other hand car Impo does not offer free credit but will give you tk 80000 off the list price. If the interest rate is 12 percent, which offer should you prefer? Why?

2. Jawad limited is creating a sinking fund to redeem its preference share capital of tk 5 00 000 issued on 1st January , 2001 and maturing on 31st December , 2010, the first annual payment will be made on 31st December, 2001 and expects the fund will earn 8% per year. How much will be the amount of sinking fund payment?

3. Your father has promised to give you tk 100 000 in cash on your 25th birthday, today is your 16th birthday. He wants to know three things:

(a) If he decides to make annual payment into a fund after one year, how much will each have to be if the fund pays 8%?(b) If he decides to invest a Lump sum in the account after one year and let it compound annually, how much the Lump sum be?(c) If in a payments are made at the beginning of the year, how much the value of the annuity?

4. ABC co. makes an agreement with a bank to make deposits as follows:

Tk 500 is to be deposited at the end of year 1
Tk 1000 is to be deposited at the end of year 2
Tk 1500 is to be deposited at the end of next 13 year .To what sum will the above deposits accumulate at the end of 3-15th year, assuming interest is 10%?

5. Mr. Shakil borrowed tk 15000 at 14% annual rate of interest to be repaid over three years. The loan is amortized into three years. The loan is amortized into three equal annual end of the year.

(i) Calculate the annual end of year loan amount.

(ii) Prepare a loan amortization Schedule.

6. How much the bank will pay after December 31, 2005 start depositing tk 500 in the first week of every calendar month from January 2000 and yearly interest is 12%.

7. Eastern housing lid. Has been doing real estate business. You have selected an apartment of Eastern View at Banani costing tk 30 lakh. You have three offers:

(i) Pay full in cash
(ii) Pay 20% of the cost in cash immediately and pay tk 2.3 lakh in each installment for next fifteen years. 
(iii) Pay 30% of the value cash take a loan of tk 21 lakh from DBH at 15% interest to be repaid in equal monthly installment over next 16 years.

Which offer should you accept? Assume 12% opportunity cost?

8. A bank offered you an annuity of tk 1800 for 10 years if you invest tk 12000 today. What rate of return would you earn?

9. At what rate of investment interest compounding annually will sum of money increase by 200% in 10 Years?

10. Find the number of years at which money will triple it self at 10% interest rate annually.