1. Chapter 03& 04 : Banking What is the Bank ? 1. Receive Deposits
2. Grant Loans
3. Other services

2. Bank and Economy Borrowers-Spenders Banks or MFIs Depositors - Lenders
Pay Interest
Pay Interest
Pay Interest
Banks or MFIs

3. There are two types of interest in the Economy
Simple Interest karR)ak;eTal
Interest
karR)ak;
Compound Interest karR)ak;smas

5. Simple Interest
Simple Interest:
The interest on a loan that charges interest only for the period of time.
KWCakarR)ak;EdlKitEtelIR)ak;edIm¬Edl)anx©I¦kñúgRKb;ry³eBl.
Formula of Interest:
I= Prt where :
I= Interest ($ )
P= Principal
r= Interest rate ( %) per year
t = period of time

6. Future Value of Simple Interest or Total Amount:
FV = P +I = P + Prt = P( 1 + rt ) or FV = PV ( 1 + rt ) where PV = Present Value

7. 2. Compound Interest :
karR)ak;smas KWCakarR)ak;elIkarR)ak; . RtUv)aneKeRbIR)as;sMrab;hirBaØvtßúry³eBlEvg.
¬karR)ak; bUkCamYyR)ak;edImedIb,ITUTat;eTARKaeRkay ¦

8. Future Value and Present Value
Future Value (FV) is what money today will be worth at some point in thefuture.
tMélGnaKtCaluyenAéf¶enHnwgCaluynaeBlGnaKt.
Present Value (PV) is what money at some point in the future is worth today. tMélbc©úb,nñCaluykñúgeBl GnaKtCaluyenAéf¶enH.

9. Figure 9-1 Relationship of present value and future value$
$1, future value
$1,000 present value
10% interest 1 2 3 4
Number of periods

10. Formula of FV and PV

11. FV2
FV1
FV3
FVt-1
FVt PV t 3
t-1 2 1

12. Proof :

13. m :cMnYndgénkarTUTat;
General Formula
m :cMnYndgénkarTUTat;

14. Use The MS Excel: FV and PV
FV( rate, nper, pmt,[pv],[type]) where:
-rate: CaGRtakarR)ak;kñúgRKa
Nper: cMnYnRKa
Pmt: CacMnYnTwkR)ak;Edlbg;tamkalnImYy²
PV: CatMélbc©úb,nñ
Type: sMrab;kMNt;ry³eBlCak;EsþgEdleyIgRtUvbg;EdlmanCMerIsBI KW 0 nig 1
Edl 0 eRbIsMrab;krNIbg;cugRKa
1 eRbIsMrab;krNIbg;edImRKa

15. Single Amount of FV and PV
You should type the formula:
=fv( rate,nper,0, -pv, 0)
=pv(rate, nper,0,-fv,0)

16. Example:
PV = $1,000
t = 5 years
r = 10%
FV = ?

17. Annuities
Annuity: a stream or series of equal payments to be received in the future
The payments are assumed to be received at the end of each period (unless stated otherwise)
A good example of an annuity is a lease, where a fixed monthly charge is paid over a number of years

18. Future Value of An Annuity ( FVA)
An annuity is set up in which there are yearly payments of $200 for 5 years with interest being paid at the annual rate of 6% compounded annually. Find the amount of the annuity. 4 2 3 5 1
$200
$200
$200
$200
$200

19. Formula of FVA

20. Proof:
t-1 2 3 t 1 $A $A $A $A $A
FV0
FV1
FVt-1 20

21. Formula

23. In Ms Excel in computing FVA
a) Ordinary of FVA
=fv(rate,nper, -pv,0,0)
b) FVA of Annuity Due:
=fv(rate, nper,-pv,0,1)

24. Present Value of An Annuity ( PVA)
General Formula of PVA

25. Present Value of An Annuity ( PVA)2 3
t-1 1 $A $A $A $A $A
PV1
PV2
PVt 25

28. Present Value of An Annuity ( PVA)
An annuity is set up in which there are yearly payments of $200 for 5 years with interest being paid at the annual rate of 6% compounded annually. Find the amount of the annuity. 4 2 3 5 1
$200
$200
$200
$200
$200 28

29. Example:
How much money you will deposit today in your account which pays 8% interest per year, you could withdrawal $100 at the end of each year for the next five years ?

30. Ms Excel of PVA Ordinary of PVA =pv(rate,nper,-pv,0,0)
b)PVA of Annuity Due:
=pv(rate, nper,-pv,0,1)

31. What is the power of your money ?

32. Poor can help
but Lazy cannot help