Future Worth Analysis Future wort isan amount of the money with interest fora fixed period in furure. The future value can b found for present investment as well as for uniform series payments. Both the methods are discussed in the following subsections. > Finding Future Equivalent of Given Present Value sr present and 6s the interest rate per period, the amount wll grow toa future Ifan amount Pis we Senet P Py _ PBBe i) by the end of one period; by the end of two periods, the amount will grow to PAs +i)=P0t a on. Therefore, F=P(+ i)" = PCFIP, i% N) 72 a Rule 72; Time-period required to double the present amount: NV % 7os Annual Cash Flow Analysis Annual cash fow is concerned with the annual receipt of the present investment and/or the annual deposits ro getsome fed amount in fate. A person may wish to invest now to get an equal assured amount at the end of tach year fr the certain periods, Similarly, he/she may wish to deposit an equal amount at the end of each year to gersome assured amount at the end of investment. Both the processes are discussed in the following subsections. Finding Annuity from Given Future Value Suppose, we want to know that how much money (A) should be deposited at the end of each year for the period Nat an interest rate of /% to accumulate and amount F at the end of the N" period, we may use the following formula: AzF|—t__|. i Fen F(AIF, i%, N)Er You are a 30-year-old serviceman and are planning to ensure an annual income of Rs. 150,000 afier your retirement atthe age 0f60, tll you reach 80. You plan to make annual deposits into your account till you turn 60. {f the interes rates a constant 10% daring the period, how much must you deposit annually into your account to generate the required income after retirement? Solution In this problem, the furure value of 30 equities (from the end of 31" year to the end of 60* year) at the end of 60" year should be equal to the present value of 20 annual receipts (from the end of 61" year to 80" Year) athe end of 60" year or at the beginning of 61" year as shown in Fig. 6. AoA Al AAA se llr rrr AY AL AVAL F= Po