important calculation to managing investment by p.j.surjit

8/18/2019 Important Calculation to Managing Investment by p.j.surjit

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Important Financial Calculation to Managing Investment

Managing money can involve calculations to understand the worth of an

investment. To arrive at a result, calculations can be done in a dierent way or by

using a dierent formula.

Even the same formula can be used dierently to arrive at a certain result. Here are

a few commonly used money management formulas. Use an excel sheet to do

these.

1. Doubling, Tripling & quadrupling of Money

I can get ! " return on my e#uity investments. In how many years can I double or

even tri$le % #uadru$ling my money&

'ormula( )o. of years to

*ouble the money + !-ex$ected return !-! and you will get / years.

'or tri$ling the money +0-! you will get 1.2 years.

'or #uadru$ling the money+00-! you will get ! years.

. Compound Interest

I want to ta3e a loan of I)4 la3h to buy a used car. How much the car will cost me

at an annual interest rate of 5 " for 0 years&6

The com$ound interest formula can be used here to calculate the 7nal cost, which

would include the loan amount and the interest $aid6 The amount that is actually

$aid for I)4 la3h is I)4 8/,905.19. The total amount of interest charged forborrowing I)4 la3h is I)4 8/,905.19.

'ormula( 'uture value + : ; 4< =)

Ty$e in( +99999;5"< =0 and hit enter. :( amount borrowed> 4( rate of interest>

)( time in years.

?lso used for( @alculating the maturity value on lum$ sum investment ban3 7xed

de$osits and )ational Aavings @erti7cate, for exam$le< over a 7xed $eriod at a

certain rate of interest.

!. Compound "nnuali#ed $ro%t 'ate

I had invested I)4 la3h in a mutual fund 7ve years bac3 at an )?B of I)4 !9. )ow

the )?B is I)4 9. How should I calculate my returns on an annual basis&6

@om$ound annualiCed growth rate @?D4< will be used here to calculate the growth

over a $eriod of time6

:surit surit$Fgmail.com


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The gain of I)4 29 over 7ve years on the initial )?B of I)4 !9 is a sim$le return of

!29 $er cent 29-!9 G 99


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?lso used for( @alculating M' returns, es$ecially AI:, or that for unit&lin3ed insurance

$lans.

+. ost-Ta 'eturn

I want a ban3 '* at 9" return for 2 years. I $ay income tax. Lhat will be the

returns&6

The $ost&tax return has to be calculated here6 The idea is to 3now the 7nal returns

on a fully taxable income. Interest income from the ban3 is taxed as $er your tax

slab.

'ormula( 4OI & 4OI G T4< +:ost&tax return

Ty$e in( +9 & 9 G 89.1"< and you will get /.1"

4OI( rate of interest> T4( tax rate de$ends on tax slab<

?lso used for( @alculating $ost&tax returns of national savings certi7cates, $ost&oSce time de$osits, and Aenior @itiCensQ Aavings Acheme.

/. re-Ta 0ield

My brother says that the investment in $ublic $rovident fund ::'


4/4

Ty$e in( +29999G;2" or .92< =!9 and you will get 4s , 8!,//0 as the answer,

which is the re#uired amount.

?lso used for( @alculating maturity value on an investment.

3. urcasing o%er

My familyQs monthly ex$ense is 4s 29,999. ?t an ination rate of 2 ", how much

will be the $urchasing value of that amount after !9 years&

Ination increases the amount you need to s$end to fetch the same article and in a

way reduces the $urchasing $ower of the ru$ee. Here, 4s 29,999 after !9 years at

an ination of 2" will be able to buy goods worth 4s 5,500 only.

'ormula( 4educed amt. + :resent amt. - ; ination< =no. of yrs.

Ty$e in( +29999- ;2"< =!9 and you will get 4s 5,500, which is the reduced

amount.14. 'eal 'ate of 'eturn

I wants to ma3e a one&year ban3 '* at 1 $er cent. On maturity, he says, the ca$ital

will be $reserved and he would get assured return on it.

It is true that 7xed de$osit is safe and gives assured returns. However, after

adusting for ination, the real rate of return can be negative.

'ormula( 4eal rate of return+ ;4O4

important calculation to managing investment by p.j.surjit

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