FUTURE VALUE (F M)

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ashay (Querist)
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19 February 2011 CAN ANY ONE PLS EXPAIN ME HOW THIS FV IS CALCULATED AND HOW TO CALCULATE 4.046

PLS

Ram has deposited Rs. 55,650 in a bank, which is paying 15 per cent rate of
interest on a ten-year time deposit. Calculate the amount at the end of ten years?

Calculation of Future Value (FV)
FV = P  CVF10,0.15
FV = 55,650  CVF10,0.15
(CVF of Re. 1 at 15 percent for 10 years is 4.046)
= 55,650  4.046
= Rs. 2,25,159.90.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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20 February 2011 Future value after 10 years at 15% rate of interest means
1. On the deposited amount by Ram Bank will provide interest @ 15% annually.
2.After completion of 1 yr this amount will be compounded with 55650/ i.e. principal.
and it will be eligible for 2nd yr's Interest.
3. After completion of 2nd yr the same process will be repeated.
4. The formula for Amount(A) after n (10) years @ Compound Interest Rate i i.e.(15% =.15) is -
A=P(1+i)to the power n
= 55650(1+.15)to the power 10
So calculate 1.15x1.15x1.15 ten times.
You will get 4.046.
5. You may ask for Readymade tables in the exam.

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