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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Time Value of Money

Meera wants Rs 2,42,000 two years from now. The bank offers 10% per annum compounded annually. How much should she deposit today?

Meera should deposit Rs 2,00,000 today. Discounting Rs 2,42,000 for two years at 10% means dividing by 1.21, which gives Rs 2,00,000. Growing that amount at 10% for two years returns exactly Rs 2,42,000, confirming the result.

  1. ARs 2,00,000Correct
  2. BRs 2,01,667
  3. CRs 1,93,600
  4. DRs 2,20,000

Explanation

PV = 2,42,000 / (1.10)^2 = 2,42,000 / 1.21 = Rs 2,00,000. Check: 2,00,000 x 1.21 = 2,42,000. Rs 1,93,600 wrongly discounts at a simple 20% (2,42,000 x 0.8), and Rs 2,20,000 discounts for only one year.

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