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Let's say you have turned 25 and just had a meeting with your financial advisor.

She, very strongly, suggested that you start sa


your retirement and you will retire at age 60 so you have 35 year Rs. save towards your retirement fund. She suggests that the
should be Rs. 10 million when you retire. Suppose you start saving one year from now & invest the same amount into your acc
the last investment being at 60. What is the yearly investment into the retirement fund, if you can earn 8% return on your inve

Future value at 60 $ 10,000,000 Interest rate 0.08 No of period

Using PMT (payment per period) formula in excel

PMT = ($58,032.65) where rate 0.08


nper 35
pv 0
fv $ 10,000,000

If you invest Rs. 58,032.65 every year for 35 years at a return of 8%, what will be the future value of the
accumulated amount?

Using FV formula in excel

FV = $10,000,000.00 where rate 0.08


nper 35
pmt ($58,032.65)
pv 0

What is the present value of the investments that you would be making into your retirement
account?

Using PV formula in excel

PV = $676,345.43 where rate 0.08


nper 35
pmt ($58,032.65)
fv 0

Suppose you make a onetime investment of Rs.676,345.43, which is the value that we got as the present
value of all the investments that you would be making over the 35 years and let it earn a return of 8% per annum for
35 years, what would be the future value of this investment.

Using FV formula in excel

FV = $10,000,000.00 where rate 0.08


nper 35
pmt 0
pv ($676,345.43)
y, suggested that you start saving money towards
nt fund. She suggests that the retirement fund
he same amount into your account every year with
n earn 8% return on your invested funds?

35

ue of the

e present
n of 8% per annum for
WEEK 2 : PLANNING FOR RETIREMENT UNGRADED QUESTION 1

Mrs. Mani plans to save Rs. 10,000 every month.


She deposists Rs. 10,000 at the start of every month, starting now for 5 years in a bank deposit which pays 8% per annu
What would be the value of her savings at the end of 5 years? (HINT:USE EXCEL)

Solution: Using the FV function in excel, we get:

rate Monthly rate 0.0067


nper Time in months 60
pmt Payment -10000
[pv] Present Value 0
[type] Type 1

Future Value = ₹ 739,667.02


DED QUESTION 1

month.
osit which pays 8% per annum, with monthly compounding.
years? (HINT:USE EXCEL)
Donald Clinton is planning his retirement. He is 55 years old today. He would like to have Rs. 800,000 by the time he is 70. H
constant sum of money over the 15 year period in a bank account at the rate of 12% per annum.How much should Mr. Clint
each year for the next 15 years to obtain Rs. 800,000 when he turns 70? (HINT:USE EXCEL)

Future value at 70 $ 800,000 Interest rate 0.12 No of period

Using PMT (payment per period) formula in excel

PMT = ($21,459.39) where rate 0.12


nper 15
pv 0
fv $ 800,000
0,000 by the time he is 70. He intends to deposit a
m.How much should Mr. Clinton invest at the end of

15
Mr. Akram wants Rs. 500,000 at the end of 8 years from now. Find the amount to be deposited at the end of each year, in a
interest compounded annually. (Choose option closest to your calculation. HINT: USE EXCEL)

Future value at 8 years $ 500,000 Interest rate 0.07 No of period

Using PMT (payment per period) formula in excel

PMT = ($48,733.88) where rate 0.07


nper 8
pv 0
fv $ 500,000
e end of each year, in an account offering 7%

8
You are considering an investment of $ 1500 annually. The first payment is made now and the last payment is made at
The annual return on this investment is 3%. What is the future value at the end of year 4 of this investment?(HINT: It will be u

2250
year 1 2317.5
year 2 2387.025
year 3 4708.636
year 4 4849.895
yment is made now and the last payment is made at the end of year 3.
e end of year 4 of this investment?(HINT: It will be useful to draw a timeline.)

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