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Table Of Content

Particulars Page Number


Abstract 01
Introduction 02
Problem Description 03
Problem investigation&Analysis 04
Recommendation &Findings 09
Conclusion 11
Abstract
Now a days, Bank is the most safer place for the people to invest their income. It
enables the people to earn profit/interest with out taking any risk. Banks offer us various
types of scheme, in this report we just analyze two schemes Term Savings & Annuity
Savings.For term savings we have converted the present value into Future value.For annuity
savings we have calculated the interest rate and justified the informations provided by the
Banks. We use numerical method for all calculations.
Introduction
We collect our raw materials from the following Banks:
i) Dutch Bangla Bank Ltd.
ii) Mutual Trust Bank Ltd.
iii) Mercantile Bank Ltd.
The interest rates given by the banks for term savings differ from one another. We
have converted the present value into future value for every Bank.
The interest rates given by the banks for annuity savings vary from one another. For
Mercantile Bank we have calculated the interest rate. For DBBL and MTB we have justified
the information provided by the banks.
The purpose of the report is to identify the missing information from the data provided
by the bank. We also verify the information provided by the bank.
Here we just investigate three commercial banks. In case of calculation we just use
three digit after the point.
Here

FV=Future value
PV=Present Value
MTB=Mutual Trust Bank
DBBL=Dutch Bangla Bank Limited

Problem Description
After investing two savings scheme of the three commercial banks we have found
several informations missing
Those informations are-
For DBBL:
i) Future value for fixed deposit (Estimating the PV and time period)
For MTB:
i) Future value for fixed deposit (Estimating the PV and time period)
For Mercantile Bank:
i) Interest rate of for annuity savings
ii) Future value for fixed deposit (Estimating the PV and time period)
Problem Investigation & Analysis
For Term Savings
Dutch Bangla Bank Ltd.:
The interest rate offered by the DBBL is 7.00%. If a saver invests 1,00,000 for 5 years than
future value:
We know FV= PV(1+i)
n
= 1,00,000 (1+.07)5
= 140,255
PV = 1,00,000
i = 7.00%
n = 1
Hence, the person will get Tk. 140,255 after five years.
Mutual Trust Bank Ltd.:
This Bank offers us separate interest rate for separate time period. If a saver invests
for 6 month, he will get interest @8.25%. He will get 8.50% interest for 3 months and 8.50%
for 1 or more than one year.
If a saver invests 1,00,000 for five years than the Future value:
FV = PV (1+i)
n
= 1,00,000 (1+.085)
5
= 150,366
Hence, the person will get 150,366 for after five year.
Calculation of Effective rate for 3 months, where interest rate is 8.50
Effective Rate = 1
m
m
nom
i
1

,
_

+

8.77%
1
4
4
0.085
1

,
_

+
Calculation of Effective rate for 6 months, where interest rate in 8.25%
Effective rate 1
m
m
nom
i
1

,
_

+
8.42%
1
2
0.0825
1
2

,
_

+

Mercantile Bank Ltd.:
This bank offers us different interest rates for different time periods. They offer 7%
for 1 month, 8.5% for 3, 6, 12 months or more.
If a saver invests 1,00,000 for five years.
Than the future value:
FV = pv (1+i)
n
= 1,00,000 (1+.085)
5
= 1,50,366
Calculation of Effective rate for 6 month where interest rate in 8.50%
Effective rate = 1
m
m
nom
i
1

,
_

+

8.77%
1
4
4
0.085
1

,
_

+

Calculation of Effective rate for 6 month where interest rate in 8.50%
Effective rate = 1
m
m
nom
i
1

,
_

+
8.68%
1
2
0.085
1
2

,
_

+
For Annuity Savings
Dutch Bangla Bank Ltd.:
This bank offers us 7.00% interest. If the monthly payment is 500 at an interest rate of
7.00% after 5 years the future value given by the bank is Tk. 35,910.
To justify the amount the calculation will be:
FV
( ) i 1
i
1 i) (1
PMT
n
+

,
_

36,005
12
.07
1
12
0.07
1
12
0.07
1
500
12 5

,
_

,
_

,
_


Mutual Trust Bank:
This bank offers us 9.25% interest. If the monthly payment is 500 at an interest rate of
9.25% after 5 years the future value mentioned by the bank is 38.080.
To justify the amount the calculation will be:
FV
( )
( ) i 1
i
1 i 1
PMT
n
+

,
_

38,253
3 1.00770833
.007708333
.58522532
500
12
.0925
1
12
.0925
1
12
.0925
1
500
12 5

,
_

,
_

,
_

,
_


Mercantile Bank Ltd.:
If one person invests Tk. 500 monthly for 5 years he will get Tk. 38,250 at the time of
maturity.
Now we have to calculate the interest rate.
If the interest rate is 9% then the person will get:
FV
( )
( ) i 1
i
1 i 1
PMT
n
+

'

37,995
12
0.09
1
12
0.09
1
12
0.09
1
500
12 5

,
_

'

,
_

If the interest is 9.25% then the person will get


FV
( )
( ) i 1
i
1 i 1
PMT
n
+

'

253 , 8 3
12
0.0925
1
12
0.0925
1
12
0.0925
1
500
12 5

,
_

'

,
_

So the interest rate for Mercantile Bank is 9.25%.


Recommendation and Findings
Comparison of FV for term Savings
Nominal Interest Rate
Name of Bank PV Interest Rate FV
Dutch Bangla Bank Ltd. 1,00,000 7.00% 140,255
Mutual Trust Bank Ltd. 1,00,000 8.50% 150,366
Mercantile Bank Ltd. 1,00,000 8.50% 150,366
Here we see Mutual Trust Bank and Mercantile Bank are preferable than Dutch
Bangla Bank as their interest rate and FV are greater than Dutch Bangla Bank Ltd.
Effective Interest Rate
Name of Bank Quarterly Semi annually
Mutual Trust Bank Ltd. 8.77% 8.42%
Mercantile Bank Ltd. 8.77% 8.68%

Note: DBBL does not use effective interest rate.
From the above table we identify that for quarterly compounded interest rate MTB
and Mercantile Bank offer same rate. But for semi annually compounded interest rate
Mercantile Bank offers greater interest rate than the Mutual Trust Bank.
Comparison of Interest Rate for annuity savings among the Banks:
Name of Bank Monthly
Payment
Interest Rate FV for 5 year
Dutch Bangla Bank Ltd. 500 7.00% 36,005
Mutual Trust Bank Ltd. 500 9.25% 38,253
Mercantile Bank Ltd. 500 9.25% 38,253
Here we find MTB and Mercantile Bank offer us same interest rate which is greater
than the interest rate of Dutch Bangla Bank Ltd. So we prefer Mutual Trust Bank Ltd. and
Mercantile Bank Ltd. equally. The amount given by the Bank is slightly different from our
calculation. Such as-
Name of Bank Amount given
by the bank
Amount found
by our
calculation
Difference
Dutch Bangla Bank Ltd. 35,910 36,005 95
Mutual Trust Bank Ltd. 38,080 38,253 173
Mercantile Bank Ltd. 38,250 38,253 3

Conclusion
From our investigation we observe that different banks offer different interest
rate on deposited money both for term savings and annuity savings. They use various
mechanism to attract the client. The people, who dont know how to calculate their
real benefit, sometimes make wrong decision. But its our responsibility to verify the
reality of different schemes provided by the Bank. So that we can get the maximum
benefit from our investment
University of Dhaka
Department of Accounting & Information Systems
BBA Program
Course: Financial Management-1 (2104)
Submitted to:
Md. Safayat Hossain
Lecturer
Dept. of Accounting & Information Systems
University of Dhaka
We are:
1. Prashanta Saha 15046
2. Khondokar Abdullah Al Mahmud 15054
3. Arifa Akter 15016
4. Mariam Rabeya 15062
5. Jannat Ara Alvee 15004
Date of Submission: April 10, 2010
An Investigation of Different Savings
Schemes of the Commercial Bank of
Bangladesh