Time value of money and Capital budgeting exercise


  1. You have applied for a job with a local bank. As part of its evaluation process, you must take an examination on time value of money analysis covering the following questions:


  1. What’s the future value of Br.10,000 after 3 years if it earns 4%, quarterly compounding?


  1. What is the future value of a 3-year, Br.200 ordinary annuity if the annual interest rate is 4%?


  1. A 20-year-old student wants to save Br.5 a day for her retirement. Every day she places Br.5 in a drawer. At the end of each year, she invests the accumulated savings (Br.1,825) in a bank account with an expected annual interest of 10%. If she keeps saving in this manner, how much will she have accumulated at age 60?


  1. Mr. Belay plans to send his son for higher studies abroad after 8 years. He expects the cost of these studies to be Br.1,000,000. How much should he save annually to have a sum of Br.1,000,000 at the end of 10 years, if the interest rate is 15 percent?


  1. Construct an amortization schedule for a Br.1,000, 5% annual interest loan with three equal installments.


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