CA.

Pranav Popat
→ A commerce graduate and first attempt Chartered Accountant, Pranav is one the youngest CA
Faculties in India. He loves Public Speaking and motivating students. His unique approach of
teaching helps commerce students to get rid of “MATHS PHOBIA”.

→ Currently, he teaches Mathematics, Statistics & Logical Reasoning

(Foundation Level CA/CS) and Cost/Management Accounting (CA
Inter). Students admire him for creating very interactive learning
environment in the classroom which helps them to get more
connected to the subject practically.

→ He worked with Wipro Limited for 2 years in the area of cost

control and deal pricing. In his 3 years practical training, he earned
exposure in the field of Auditing, Industrial Implementation and
other Financial Services for various corporate as well as PSU clients.

→ His Motto in Life: When life puts you in trouble, don’t say WHY ME? Just say TRY ME!!!!

/learnwithCAPranav /learnwithPranav
+91 83197 87329
@learnwithPranav @pranav_2512

Time value of money

formula and tricks
2 CA Foundation - Time Value of Money | Formula and Tricks | Learn with CA. Pranav

Simple Interest
Formula for SI
P.r.t
S.I. =
100
Formula for Accumulated
A = P + SI (amount is also called as Balance)
Amount under SI

Using Calculator Press P × r × t ÷ 100

Example 1: Find out SI S.I on ₹ 3,500 for 3 years at 12% per annum is?

Example 2: Find out P = ₹ 12,000, A = ₹ 16,500, T = 2 ½ years. Rate percent per annum
Rate of Interest
simple interest will be?

Example 3: Find out

Time Period
P =₹ 8,500, A = ₹ 10,200, R = 12 ½ % SI, t will be?

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3 CA Foundation - Time Value of Money | Formula and Tricks | Learn with CA. Pranav

Compound Interest
Conversion Period No. of Conversion Periods
Yearly 1
Half-yearly 2
Conversion periods
Quarterly 4
Monthly 12
Daily 365

n
Accumulated A=P(1+i)
Amount under CI
Where, P = Principal, i = adjusted interest rate, n = no. of periods
annual interest rate
Adjusted interest
no. of conversion periods
rate i
Ex. if rate is 6% p.a. and compounding is half yearly, i=6/2=3%

Time in year × no. of conversion periods.

No. of periods
Ex: if time is 2 years and compounding is quarterly, n = 2×4 = 8

Example: P=1000, i=10%, n=3 then

Formulas in C.I. Calculator Steps to obtain A: Write
Calculator Trick
P i.e 1000 then press
for Amount of CI
+ 10 % + 10 % + 10 %
(three times because n=3),
Example: P=1000, i = 10% = 0.1, n=3 then
Use of formula Calculator Steps:
using Calculator 1+0.1 × = = (first equal will be considered as
power 2, second as 3 and so on) × 1000 (Principal)
Note If question is silent about conversion period, assume it to be yearly

CI Formula CI=P[(1+i)n -1]

Example 1: Calculate Compute the compound interest on ₹ 4,000 for 1½ years at 10% per annum compounded
Amount as per CI and half- yearly.

CI

Example 2: Calculate On what sum will the compound interest at 5% per annum for two years compounded
Principal annually be ₹ 1,640?

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4 CA Foundation - Time Value of Money | Formula and Tricks | Learn with CA. Pranav

Example 3: Calculate What annual rate of interest compounded annually doubles an investment in 7 years?
rate of interest

Example 4: Calculate In what time will ₹ 8,000 amount to ₹ 8,820 at 10% per annum interest compounded
Time Period half-yearly?

Effective rate of interest

Formula E=[ 1+i n -1]

n here n means
ans no. of periods in one year considering the compounding

Example: ₹ 5,000 is invested in a Term Deposit Scheme that fetches interest 6% per annum
compounded quarterly
quarterly. What is effective rate of interest?

Cashflow

Single Annuity

Future Present
Regular Due
Value Value

Present Future Present Future

Value Value Value Value

/
5 CA Foundation - Time Value of Money | Formula and Tricks | Learn with CA. Pranav

Formula for Single Cash flow

n
Future Value of Single Cash flow FV=PV (1+i)
Example: You invest ₹3000 in a two year investment that pays you 12%
per annum. Calculate the future value of the investment

FV
Present Value of Single Cash flow PV=
(1+i)n
Example Find the present value of ₹ 10,000 to be required after 5 years
if the interest rate be 9%.

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6 CA Foundation - Time Value of Money | Formula and Tricks | Learn with CA. Pranav

Future Value of Annuity

FVA = AI × FVAF (n, i) or

(1+i)n - 1
FVA = AI
Formula for FV of Annuity Regular i

AI = amount of installment or Annuity, FVAF means future value

annuity factor (it’s a multiplier used to convert installment to its
Future value)
Example: ₹ 200 is invested at the end of each month in an account
paying interest 6% per year compounded monthly. What is
the future value of this annuity after 10th payment?

FVA Due = FVA × (1+i)

Formula for FV of Annuity Due
Calculate FVA regular normally and then multiply it by (1+i)
Example: Mr. P invests ₹10,000 every year starting from today for next
10 years. Suppose interest rate is 8% per annum compounded
annually. Calculate future value of the annuity.

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7 CA Foundation - Time Value of Money | Formula and Tricks | Learn with CA. Pranav

Present Value of Annuity

PVA=AI × PVAF(n,i)

(1+i)n -1
Type 1: PVA=AI
i(1+i)n

Formula for PV of Annuity Regular or

AI 1
Type 2: PVA= 1- n
i (1+i)

AI =amount of installment or Annuity, PVAF means present value

annuity factor (it’s a multiplier used to convert installment to its
present value)
Calculator Trick of PVAF (Present Value
Annuity Factor) 1+i ÷ = = ……n times GT
Example: ₹ 5,000 is paid every year for ten years to pay off a loan.
What is the loan amount if interest rate be 14% per annum
compounded annually?

Formula for PV of Annuity Due PVA Regular for one shorter period + Initial Cash flow

Example: ₹ 5,000 is paid every year for ten years to pay off a loan
starting from today. What is the loan amount if interest rate
be 14% per annum compounded annually?

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