Module 3/14, Lesson 1/28
 

3.1 Time Value of Money and Cash Flow

Time Value of money is one of the important concepts you must master to be a CCP. This lecture shall explain you Time Value of Money concept in full detail.

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Tutorial 1: Simple Interest Rate

ABC Design borrows $3000 from their parent company to setup an advance CAD system. The parent company agrees to charge them simple interest at the rate of 5% per year. Suppose the ABC design waits two years and then repays the entire loan. How much will ABC Design have to repay?

  Demo  

Tutorial 2: Compound Interest Rate

Joe deposits $1000 in a savings account that pays interest at the rate of 6% per year, compounded annually. If all of the money is allowed to accumulate, how much will Joe have after 12 years? Compare this with the amount that would have accumulated if simple interest had been paid.

  Demo  

Tutorial 3: Nominal interest rat

A bank claims to pay interest to its depositors at the rate of 6% per year, compounded quarterly. What are the nominal and effective interest rates?

  Demo  

Tutorial 4: Nominal and Effective interest rate

James plans to buy a $150 000 house. He wants to make a down payment of $30 000 and to take out a 20-year mortgage for the remaining $120 000, at 10% per year, compounded monthly. How much must James repay each month?

  Demo  

Tutorial 5: Single Payment Compound Amounts Factor

Jim deposits $1000 in a savings account that pays interest at the rate of 6% per year, compounded annually. If all of the money is allowed to accumulate, how much money will Jim have after 12 years?

  Demo  

Tutorial 6: Single Payment Present worth Factor

Jack deposits a certain sum of money in a savings account that pays interest at the rate of 6% per year, compounded annually. If all of the money is allowed to accumulate, how much Jack must deposit initially so that $5000 will have accumulated after 10 years?

  Demo  

Tutorial 7: Sinking Fund Factor

Jab Inc deposits fixed sum of money, X, in a savings account at the end of each year for 20 years. If the bank pays 6% per year, compounded annually, find A such that Jack Inc shall fetch a total of $50 000 accumulated at the end of the 20-year period.

  Demo  

Tutorial 8: Capital Recovery Factor

You have accumulated $50 000 in your saving bank account to run a scholarship program at you college. If the bank pays interest rate 6% per year, compounded annually, what shall be the maximum fixed sum of money you can withdraw at the end of each year for 10 years?

  Demo  

Tutorial 9: Uniform Series Compound Amount Factor

You are making equal end-of-year deposits of $5,000 to fund your son university fee at 8% per year for 10 years, how much can be expected to be available for withdrawal from the account immediately after the last deposit is made?

  Demo  

Tutorial 10: Uniform Series Present Worth Factor

Suppose that the sum of $12,000 must be withdrawn from an account to meet the annual operating expenses of a nonprofit society. The bank interest at 7.5% per year compounded on an annual basis. If you are planning fund the society to last 10 years, how much must be deposited in the society account now so that the operating expenses of $12,000 can be with-drawn at the end of every year for 10 years?
The first withdrawal will be made 1 year after the society account is opened, and no additional deposits will be made in the account.

  Demo  

Tutorial 11: Arithmetic Gradient uniform series

Ram developed software that shall fetch him revenue of $3500 next year and thereafter the revenue shall grow arithmetically. The software will be obsolete in 5 years with no salvage value.
Ram sells the software to ABC Corp. ABC Corp promises to pay to Ram a fixed amount per year equivalent to the overall revenue Ram shall fetch from the software for 5 years.
If the prevailing rate of interest is 7% what sum Ram shall receive from ABC Crop at end of each year.

  Demo  

Tutorial 12: Gradient Present worth Factor

Sophia is planning for a 15-year retirement. In order to supplement her pension and offset the anticipated effects of inflation, she intends to withdraw $5000 at the end of the first year, and to increase the withdrawal by $1000 at the end of each successive year . How much money must Sophia have in her savings account at the start of his retirement, if money earns 6% per year, compounded annually?

  Demo