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Total Marks | 5 |
Starting Date | Wednesday, June 03, 2020 |
Closing Date | Tuesday, June 09, 2020 |
Status | Open |
Question Title | GDB #01 |
Question Description | Discussion Topic: Time Value of Money Discussion Question: Mr. Ahmed has just received gratuity and he is looking for a suitable investment option that will repay him in long term. He has consulted his friend to invest Rs. 100,000 out of his gratuity amount. His friend has suggested following two options: Option 1: Investing Rs. 100,000 at 12% interest rate compounded semiannually for 10 years. Option 2: Depositing half of investment amount in a saving account for 10 years that pays 10 % interest rate compounded annually and investing remaining half amount at 12% interest rate compounded annually for 10 years. Required:
Note: Complete Calculations and formulas are mandatory; marks will be deducted on providing just answers). |
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Discussion Question:
Mr. Ahmed has just received gratuity and he is looking for a suitable investment option that will repay him in long term. He has consulted his friend to invest Rs. 100,000 out of his gratuity amount. His friend has suggested following two options:
Option 1:
Investing Rs. 100,000 at 12% interest rate compounded semiannually for 10 years.
Option 2:
Depositing half of investment amount in a saving account for 10 years that pays 10 % interest rate compounded annually and investing remaining half amount at 12% interest rate compounded annually for 10 years.
Required:
Calculate the value of both investment options
Based on the calculation of part 1, which option Mr.Ahmed should select and why?
Note: Complete Calculations and formulas are mandatory; marks will be deducted on providing just answers).
Option 1
100000*0.12*2*10 = Rs.240000
Total Value =100000+240000 = Rs.340000
Option 2
50000*0.1*10 = Rs.50000
50000*0.12*10 = Rs.60000
Total Value = 100000 + 50000 + 60000 = Rs 210000
Select option 2 because the Total Value of this option is more than option 1
MGT201 GDB Solution Spring 2020
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solution of GDB is attached
Discussion Topic: Time Value of Money
Discussion Question:
Mr. Ahmed has just received gratuity and he is looking for a suitable investment option that will repay him in long term. He has consulted his friend to invest Rs. 100,000 out of his gratuity amount. His friend has suggested following two options:
Option 1:
Investing Rs. 100,000 at 12% interest rate compounded semiannually for 10 years.
Option 2:
Depositing half of investment amount in a saving account for 10 years that pays 10 % interest rate compounded annually and investing remaining half amount at 12% interest rate compounded annually for 10 years.
Required:
Calculate the value of both investment options
Based on the calculation of part 1, which option Mr.Ahmed should select and why?
Note: Complete Calculations and formulas are mandatory; marks will be deducted on providing just answers).
Option 1
100000*0.12*2*10 = Rs.240000
Total Value =100000+240000 = Rs.340000
Option 2
50000*0.1*10 = Rs.50000
50000*0.12*10 = Rs.60000
Total Value = 100000 + 50000 + 60000 = Rs 210000
Select option 1 because the Total Value of this option is more than option 2
Which formula is used here pls explain
100000*0.12*2*10 = Rs.240000
50000*0.1*10 = Rs.50000
see the question option 1 & 2
amount*interest rate*time*semi annually(1/2*4)
amount = 100000
interest rate = 12% or 12/100 = 0.12
time = 10 years
Half of 100000*interest rate*time
100000*1/2= Rs.50000
interest rate = 10% or 10/100 = 0.1
Time = 10 years
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