Time Value of Money: Practice Questions

1. Case: Divyanshi plans to take a short-term personal loan of ₹5,000 to invest in a new project idea.
The loan comes with an annual interest rate of 12% for 4 years.
: Calculate the total Simple Interest Divyanshi will pay at the end of 4 years.
2. Case: Harshita has invested ₹10,000 in a fixed deposit scheme that offers an annual compound
interest rate of 8%. She plans to keep the investment for 3 years.
: What will be the maturity amount and the Compound Interest Harshita will earn?
3. Case: Priyanshu deposited ₹15,000 in a savings scheme, and after 3 years, the amount grew to
₹19,448.
: Determine the annual compound interest rate for Priyanshu’s savings.
4. Case: Eshita invested ₹12,000 in a fixed deposit offering a 10% annual interest rate, compounded
semi-annually. She plans to withdraw the investment after 2 years.
: What will be the maturity amount of Eshita’s investment?
5. Case: Chetna wants to invest ₹25,000 in a government bond that offers a return of 7% per annum,
compounded annually, for 6 years.
: What will be the Future Value of this investment?
6. Case: Yogesh is expecting a payment of ₹50,000 from a project after 5 years. He wants to know the
present worth of this payment if the annual discount rate is 9%.
: Determine the Present Value of the expected payment.
7. Case: Kalyani has decided to save ₹6,000 at the end of each year for 5 years in an account offering
8% interest compounded annually.
: What will be the Future Value of Kalyani’s savings?
8. Case: Ashwani wants to evaluate a business proposal that promises to pay ₹30,000 annually for 5
years. He uses a discount rate of 10%.
: Calculate the Present Value of the proposal's annual cash flows.
9. Case: Prerna plans to set aside ₹10,000 every year for the next 6 years to create a reserve fund. The
account earns 7% annual interest.
: What will be the Future Value of the reserve fund?
10. Case: Khushi is projecting her business’s cash inflows to grow at 5% per year starting from ₹50,000
next year. The cash inflows are expected for 4 years, and the discount rate is 8%.
: Calculate the Present Value of the growing annuity.
11. Case: Mayank wants to establish a scholarship fund that will provide ₹20,000 annually forever. The
discount rate for the fund is 9%.
: How much money does Mayank need to set aside to establish this perpetuity?
12. Case: Tanya plans to invest ₹8,000 annually for the next 10 years in a retirement fund that earns 6%
interest compounded annually.
: What will be the Future Value of Tanya’s retirement fund?
13. Case: Aayushman expects to generate cash inflows starting at ₹40,000 next year, increasing by 6%
annually for 5 years. The discount rate is 10%.
: Find the Present Value of this growing annuity.
14. Case: Divita wants to establish a charitable trust that pays ₹25,000 annually forever. The expected
return on the trust’s fund is 8%.
: How much capital must be invested to establish this perpetuity?
15. Case: Rishu receives an offer to invest in a project that pays ₹15,000 annually for the next 7 years.
If he uses a discount rate of 12%,
: What is the Present Value of the cash inflows from this project?
16. Case: Harshita opens a savings plan where she deposits ₹5,000 annually for 8 years at an interest
rate of 9%, compounded annually.
: What will be the total amount at the end of the 8 years?
17. Case: Kartik starts a business with projected dividends of ₹10,000 annually, growing at 4% per year
indefinitely. The required rate of return is 12%.
: Determine the Present Value of this growing perpetuity.
18. Case: Pallavi wants to buy a car in 5 years and needs ₹7,00,000 for it. She decides to start saving a
fixed amount annually in a fund offering 10% annual returns.
: How much should Pallavi save every year to reach her goal?
19. Case: Naveen plans to buy a new machine in 3 years and needs ₹5,00,000 for it. His company earns
a return of 8% annually on its investments.
: How much must Naveen invest today to meet this goal?
20. Case: Gun owns a property generating rental income of ₹1,20,000 annually. The rent increases by
5% each year, and she uses a discount rate of 10%.
: Calculate the Present Value of the rental income for the next 5 years.
21. Case: Nupur invests ₹20,000 in a savings account that offers 7% annual interest compounded
quarterly. She plans to withdraw the amount after 2 years.
: What will be the maturity amount, and how much Compound Interest will Nupur earn?
22. Case: Tanu takes a loan of ₹50,000 for her startup at an annual simple interest rate of 10% for 5
years.
: Calculate the total Simple Interest she will pay and the total amount she will need to repay.
23. Case: Priyadarshani wants to save for a vacation and needs ₹1,00,000 after 4 years. She plans to
deposit a fixed amount annually into an account offering 9% interest compounded annually.
: How much should Priyadarshani deposit every year to reach her goal?
24. Case: Akshat expects to receive ₹1,20,000 from a project 3 years from now. He wants to know the
present worth of this payment if the discount rate is 10%.
: Determine the Present Value of Akshat’s expected payment.
25. Case: Pratul plans to create a scholarship fund to pay ₹15,000 annually to a deserving student
forever. The discount rate is 6%.
: How much capital should Pratul set aside for the fund?
26. Case: Arman wants to invest ₹30,000 annually in a retirement plan for the next 15 years. The plan
offers an interest rate of 8% compounded annually.
: What will be the total amount Arman accumulates at the end of 15 years?
27. Case: Ashwani wants to value an investment that generates ₹25,000 annually for 7 years, discounted
at 11%.
: What is the Present Value of Ashwani’s investment?
28. Case: Khushi is considering investing in a bond that pays ₹12,000 annually forever. The required
rate of return is 9%.
: What is the Present Value of this perpetuity?

29. Case: Divita owns a business that generates cash flows of ₹50,000 annually, growing at 4% each
year for the next 6 years. The discount rate is 10%.
: Calculate the Present Value of the growing annuity.
30. Case: Himanshu expects the rental income from his property to start at ₹1,00,000 next year,
increasing at a rate of 3% annually. He wants to calculate the Present Value of this perpetuity if the
discount rate is 8%.
: What is the Present Value of the expected income?
31. Case: Tanya plans to invest ₹40,000 annually in a savings plan for 10 years, with a projected return
of 7% annually.
: Calculate the Future Value of Tanya’s savings.
32. Case: Aditya needs to determine the Present Value of a growing perpetuity starting at ₹20,000
annually, growing at 5%, with a discount rate of 10%.
: What is the Present Value of the growing perpetuity?
33. Case: Pallavi decides to save ₹10,000 annually in a fund that earns 6% interest, compounded
annually, for 8 years.
: What will be the Future Value of Pallavi’s investment?
34. Case: Rishu plans to buy a car costing ₹5,00,000 in 4 years. She decides to invest a lump sum today
in a fixed deposit offering 8% annual returns.
: How much should Rishu invest today to buy the car after 4 years?
35. Case: Gunn has invested ₹10,000 annually in a fund for 5 years, which grows at a rate of 9%. She
wants to calculate the total accumulation at the end of the term.
: What is the Future Value of Gunn’s investment?
36. Case: Naveen expects cash inflows from a project starting at ₹1,50,000, increasing at 6% annually
for the next 4 years. The discount rate is 12%.
: Find the Present Value of Naveen’s expected cash inflows.
37. Case: Harshita wants to calculate the value of an investment that generates ₹60,000 annually,
growing at 4% indefinitely. The discount rate is 9%.
: What is the Present Value of this growing perpetuity?
38. Case: Kartik starts a savings plan where he deposits ₹15,000 annually for 12 years in an account
offering 7% interest.
: What will be the total amount at the end of the 12 years?
39. Case: Tanu wants to invest a lump sum today that will grow to ₹2,50,000 in 5 years at a rate of 10%.
: How much should Tanu invest today?
40. Case: Priyanshu is evaluating a business idea that will generate ₹1,00,000 next year, increasing at
5% annually for the next 7 years. The discount rate is 8%.
: What is the Present Value of the business’s projected cash flows?