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MGT201 Financial Management Graded Discussion Board (GDB) NO.1 Solution and Discussion Fall 2013 Due Date: November 22, 2013

Topic for Discussion: “Present Value and Discounting?”

GDB Question:

Few days ago, the State Bank of Pakistan (SBP) has raised interest rate up to 9.5 percent from 9.0 percent, in line with requirements set by the International Monetary Fund. This increase was in a need to curtail rising inflation by tightening the flow of liquidity through higher interest rate. You were planning to purchase an insurance policy. What will be the effect of this rise in interest rate on:

a)        Present value of insurance policy

b)       Future value of insurance policy

Important Instructions:

  • Your discussion comments must be based on logical facts.
  • Your comments should be brief and to-the-pointAvoid unnecessary details.
  • Your discussion should not exceed 120 words
  • The GDB will open and close on above specified date and time. Please note that no grace day or extra time will be given for posting comments on GDB.
  • Use the font style “Times New Roman” and font size “12”.
  • Your answer should be relevant to the topic i.e. clear and concise.
  • Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.
  • Books, websites and other reading material may be consulted before posting your comments; but copying or reproducing the text from books, websites and other reading materials is strictly prohibited. Such comments will be marked as Zero (0) even if you provide references.
  • You must post your answer on the Graded Discussion Board (GDB), not on the Moderated Discussion Board (MDB). Both will run parallel to each other during the time specified above. Therefore, due care will be needed.
  • Obnoxious or ignoble answer should be strictly avoided.
  • You cannot participate in the discussion after the due date via email.
  • Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over.

Views: 5340

Replies to This Discussion

M saqib khan... the key is 100 rupees in your hand are worth more than 100 rupees after 1 year... because we should keep it in mind that inflation will also increase.. so future value of money is less than present value of money.

but listen hum nay ya both formula use karein hn k nae ?? 

Ye present value ke liye formula ha PV = FV/(1+r)n Ye future value ke liye FV =PV*(1+r)n ??? 

i think nothing going to clear.

ma to bhot he confuse ho gay.

kaya hum ans theory ma da ya mathematic ma b satha?


theory main

kasy ???? kea khuch b nae mathematic mn example dani ??? seda seda theory mn danay say to clear nae ho raha na :(

ainy butt here in our situation we are discusing the value of insurance policy and insurance policy is a kind of investment. money in hand and money invested in some ware is different thing. money in hand loses value with the time but money invested will be increased. try to understand the concept. 

Friends.. we dont need to calculate anything here. we just need to tell that which value will be increased and which will be decreased and what is the reason behind it.

thanks dude for clearing the point......

read carefully and digest this line you'll definitely find the answer

This increase was in a need to curtail rising inflation by tightening the flow of liquidity through higher interest rate. 

you just need to give arguments, nothing more

i agreed @M saqib khan

Koe btae phr final kya kry :(


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