# Calculates following data: a) An investor invested Rs.5000/- for 4 years with interest rate 12% per year. Calculate Future value (using generalised formula).

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## Solution

The solution is mentioned below −

FVn = PV (1+r) ^n

Here, PV = 5000, r =12%, n = 4 years

FVn = 5000 (1+12%) ^4
FVn = 5000 (1.12) ^4
FVn = Rs. 7867.60/-

b) Calculate the deposit after 12 years, if the investor deposited Rs. 80000 with 12% interest rate.

FVn = PV (1+r) ^n
FVn = 80000 (1+12%) ^12
FVn = 80000 (1.12) ^12
FVn = Rs. 311678.08/-

c) An investor invested Rs. 15000 for 3 years with interest 14% compounded quarterly. Calculate Future value.

FVn = PV (1+(r/m)) ^m*n
FVn = 15000 (1+ (14%/4)) ^4*3
FVn = 15000 (1.035) ^12
FVn = Rs.22666.03/-

d) A company offers 10% rate of interests for investors. Calculate effective rate of interest - Monthly - Quarterly - Half yearly

## Solution

The solution is as follows −

Effective rate of interest (EIR) = (1+(r/m))-1

On monthly basis

EIR = (1+(r/m))-1
EIR = ((1 + (0.1/12)) ^12) -1
EIR = 1.1047 – 1
EIR = 10.47%

On quarterly basis

EIR = (1+(r/m))-1
EIR = ((1 + (0.1/4)) ^4) -1
EIR = 1.1038-1
EIR = 10.38%

On half yearly basis

EIR = (1+(r/m)) -1
EIR = ((1 + (0.1/2)) ^2) -1
EIR = 1.1025-1
EIR = 10.25%