Re: [ vuZs.net ] ...MGT201---How is it calculated...

very good answer :) nicely explained 

On Thu, May 3, 2012 at 3:12 PM, Zubair Hussain <zubair@vuzs.net> wrote:

Let me try to key in my limited thoughts on it. 

you might have seen answer of this question as 891.

Which is not in option some of folks says this question is not properly framed. 

first let me explain how they come to this 891.

You have to tell PV Present Value.

Here if formula

PV = FV / (1+i)^n

PV = present value = ?

FV = future value = 3,500,000

i = interest Rate = .18 

n = period = 50

Now plug in the values in formula

=  3,500,000/(1.18)^50 = 891

the above answer is right if in question they add line compounded annually, as noting is mentioned its compounded. 

So we will use simple interest formula for its answer which 

PV = FV/(1+rn)

PV  = 3,500,000/(1+.18*50) = 

350,000

Regards

Zubair Hussain

www.vuzs.net

On Wed, May 2, 2012 at 1:54 PM, Shahzad Sadiq <bc100200105@vu.edu.pk> wrote:

Assalam o Alaikum.........

Can somebody guide me how is it calculated.......???

What is the present value of Rs. 3,500,000 to be paid at the end of 50 years if the correct risk adjusted interest rate is 18%?

 

Rs.105,000

Rs.1,500,000

Rs.3975,000

Rs. 350,000

--

Regards,

 

Shahzad Sadiq

BBA(Hons)

5th Semester

 

...~*Virtual University Of Pakistan*~...

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