Page 45 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes 7. Explain the meaning and importance of valuation concept. How does valuation concept
help in decision making?
8. Explain the rule of 69. How does it compare with the rule of 72?

9. “A bird in hand is more preferable than two birds in the bush”. Explain.
10. A borrower offers 16 per cent rate of interest with quarterly compounding. Determine the
effective rate of income.

11. A finance company has advertised saying that, it will pay a lumpsum of ` 44,650 at the end
of 5 years to anyone who deposits ` 6000 per annum. Mr. A is interested, but he wants to
know the implicit rate of interest. Calculate it.
12. What is the present value of ` 1,00,000, which is receivable after 60 years. If the investor
required rate of interest is 10 per cent.

Answers: Self Assessment

1. n 2. Annually

3. Equal 4. Amortization
5. Rate of interest 6. True
7. True 8. True

9. False 10. False
11. True 12. False
13. False 14. False
15. False

2.16 Further Readings

Books Chandra, P. Financial Management - Theory and Practice, New Delhi, Tata McGraw-
Hill Publishing Company Ltd., 2002, p. 3.
Sudhindra Bhat, Financial Management, New Delhi, Excel Books, 2008
Van Horne, J.C. and Wachowicz, Jr, J.M., Fundamentals of Financial Management,
New Delhi, Prentice Hall of India Pvt. Ltd., 1996. p. 2.

Online link http://www.fei.org/

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