Difference in Business !! (Cash & Credit)

How people (particularly Indians) lose their money secretly, some times some people know this thing but still they are helpless.

Congratulations!!! You have won a cash prize! You have two payment options:

A. Receive $10,000 now

OR

B. Receive $10,000 in three years

Which option would you choose?

What Is Time Value?
If you're like most people, you would choose to receive the $10,000 now. After all, three years is a long time to wait. Why would any rational person defer payment into the future when he or she could have the same amount of money now? For most of us, taking the money in the present is just plain instinctive. So at the most basic level, the time value of money demonstrates that, all things being equal, it is better to have money now rather than later.

But why is this? A $100 bill has the same value as a $100 bill one year from now, doesn't it? Actually, although the bill is the same, you can do much more with the money if you have it now because over time you can earn more interest on your money.

Back to our example: by receiving $10,000 today, you are poised to increase the future value of your money by investing and gaining interest over a period of time. For Option B, you don't have time on your side, and the payment received in three years would be your future value. To illustrate, we have provided a timeline:


If you are choosing Option A, your future value will be $10,000 plus any interest acquired over the three years. The future value for Option B, on the other hand, would only be $10,000. So how can you calculate exactly how much more Option A is worth, compared to Option B? Let's take a look.

Future Value Basics
If you choose Option A and invest the total amount at a simple annual rate of 4.5%, the future value of your investment at the end of the first year is $10,450, which of course is calculated by multiplying the principal amount of $10,000 by the interest rate of 4.5% and then adding the interest gained to the principal amount:

Future value of investment at end of first year: = ($10,000 x 0.045) + $10,000 = $10,450

You can also calculate the total amount of a one-year investment with a simple manipulation of the above equation:

• Original equation: ($10,000 x 0.045) + $10,000 = $10,450
• Manipulation: $10,000 x [(1 x 0.045) + 1] = $10,450
• Final equation: $10,000 x (0.045 + 1) = $10,450

The manipulated equation above is simply a removal of the like-variable $10,000 (the principal amount) by dividing the entire original equation by $10,000.

If the $10,450 left in your investment account at the end of the first year is left untouched and you invested it at 4.5% for another year, how much would you have? To calculate this, you would take the $10,450 and multiply it again by 1.045 (0.045 +1). At the end of two years, you would have $10,920:

Future value of investment at end of second year: = $10,450 x (1+0.045) = $10,920.25

The above calculation, then, is equivalent to the following equation:

Future Value = $10,000 x (1+0.045) x (1+0.045)

Think back to math class and the rule of exponents, which states that the multiplication of like terms is equivalent to adding their exponents. In the above equation, the two like terms are (1+0.045), and the exponent on each is equal to 1. Therefore, the equation can be represented as the following:

We can see that the exponent is equal to the number of years for which the money is earning interest in an investment. So, the equation for calculating the three-year future value of the investment would look like this:

This calculation shows us that we don't need to calculate the future value after the first year, then the second year, then the third year, and so on. If you know how many years you would like to hold a present amount of money in an investment, the future value of that amount is calculated by the following equation:

Present Value Basics
If you received $10,000 today, the present value would of course be $10,000 because present value is what your investment gives you now if you were to spend it today. If $10,000 were to be received in a year, the present value of the amount would not be $10,000 because you do not have it in your hand now, in the present. To find the present value of the $10,000 you will receive in the future, you need to pretend that the $10,000 is the total future value of an amount that you invested today. In other words, to find the present value of the future $10,000, we need to find out how much we would have to invest today in order to receive that $10,000 in the future.

To calculate present value, or the amount that we would have to invest today, you must subtract the (hypothetical) accumulated interest from the $10,000. To achieve this, we can discount the future payment amount ($10,000) by the interest rate for the period. In essence, all you are doing is rearranging the future value equation above so that you may solve for P. The above future value equation can be rewritten by replacing the P variable with present value (PV) and manipulated as follows:


Let's walk backwards from the $10,000 offered in Option B. Remember, the $10,000 to be received in three years is really the same as the future value of an investment. If today we were at the two-year mark, we would discount the payment back one year. At the two-year mark, the present value of the $10,000 to be received in one year is represented as the following:

Present value of future payment of $10,000 at end of year two:

Note that if today we were at the one-year mark, the above $9,569.38 would be considered the future value of our investment one year from now.

Continuing on, at the end of the first year we would be expecting to receive the payment of $10,000 in two years. At an interest rate of 4.5%, the calculation for the present value of a $10,000 payment expected in two years would be the following:

Present value of $10,000 in one year:

Of course, because of the rule of exponents, we don't have to calculate the future value of the investment every year counting back from the $10,000 investment at the third year. We could put the equation more concisely and use the $10,000 as FV. So, here is how you can calculate today's present value of the $10,000 expected from a three-year investment earning 4.5%:


So the present value of a future payment of $10,000 is worth $8,762.97 today if interest rates are 4.5% per year. In other words, choosing Option B is like taking $8,762.97 now and then investing it for three years. The equations above illustrate that Option A is better not only because it offers you money right now but because it offers you $1,237.03 ($10,000 - $8,762.97) more in cash! Furthermore, if you invest the $10,000 that you receive from Option A, your choice gives you a future value that is $1,411.66 ($11,411.66 - $10,000) greater than the future value of Option B.

Present Value of a Future Payment
Let's add a little spice to our investment knowledge. What if the payment in three years is more than the amount you'd receive today? Say you could receive either $15,000 today or $18,000 in four years. Which would you choose? The decision is now more difficult. If you choose to receive $15,000 today and invest the entire amount, you may actually end up with an amount of cash in four years that is less than $18,000. You could find the future value of $15,000, but since we are always living in the present, let's find the present value of $18,000 if interest rates are currently 4%. Remember that the equation for present value is the following:


In the equation above, all we are doing is discounting the future value of an investment. Using the numbers above, the present value of an $18,000 payment in four years would be calculated as the following:

Present Value

From the above calculation we now know our choice is between receiving $15,000 or $15,386.48 today. Of course we should choose to postpone payment for four years! (For related reading, see Anything But Ordinary: Calculating The Present And Future Value Of Annuities.)

Conclusion
These calculations demonstrate that time literally is money - the value of the money you have now is not the same as it will be in the future and vice versa. So, it is important to know how to calculate the time value of money so that you can distinguish between the worth of investments that offer you returns at different times.

Want to save money ???

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18 ways to cut costs .....

THE basic needs of man are food, clothing, shelter and entertainment. Today, most of us have graduated from needs to luxuries. When the newspaper headlines were screaming inflation at 11.9 per cent, it became a topic of worry. Today, the challenges are not just high standard of living, high commodity prices, it's job loss too. How do you deal with meeting your basic requirements with less means to buy them?

While eating just one meal a day is good for Yogis and is a nice way to cut down costs, that is not what I'm suggesting. Instead, Try something simpler.

1. Eat at home

Eating out can be expensive. If you are spending Rs 200 on eating out compared to Rs 50 at home, you would be surprised to know the kind of amount you are spending. A systematic investment plan of Rs 150 (200-50) a day saved for 30 years can give you returns in excess of Rs 5 crore!

2. Know what you are buying

Plan your shopping. If you fill your cart with everything that catches your eye, chances are you will be spending a lot more. Instead, plan your meals for the week ahead and make careful note of what you need to buy. Purchase only the items on the list, avoid the rest.

3. Wear your blinkers

Stores are designed to make you go through a long walk to reach for your most basic items. Reason -- you can tricked into buying what you don't really need. Most basic commodities are found towards the end of the store. So, the next time you go shopping, you could skip the other outlets and move towards your destination.

4. Shop on a full stomach

When you're hungry and shopping, you may end up buying lot of things that look like food! You might also pick up what you don't really need. On the other hand, you can easily avoid unnecessary shopping when you're a full stomach.

6. Do you really need bottled water?

You can take a bottle of water when leaving home rather than buying when you're out.

7. Shop sans the kids

Hungry, tired, cranky kids increase the amount of time it takes to get your shopping done. Kids can really bug you into buying things which are bad for your health and for your purse. Leave them at home when you go out shopping.

8. Buy in bulk

You can save a significant amount of money if buying in bulk. Pay attention to the prices and pick up the family size package if the per unit cost is lower. However, you need to realise that bulk buying has a dark side too! If you are not a big user of any particular product, it could mean wastage.

9. Use store reward cards

If you visit a particular store often, you can sign up for their reward card. In some cases, stores raise their prices when they offer reward cards, and without the card your bill will certainly be higher. If the card offers other benefits, such as a preferred (or free) parking, free schemes, etc., be sure to maximize your benefits before they expire.

10. Buy local products

For instance fruits. Whenever I step into a big branded store, I was pushed into buying 'American grapes'. I fell for it once, and realized only on billing that it was Rs 400 a kg! The Indian variety is normally available for Rs 40. Locally grown or produced food is often available at a cheaper price because you don't pay for long transportation costs. Stick to them.

11. Choose unbranded goods

There is a huge cost difference between a branded product and an unbranded one. Even in case of 'expensive' items like dry-fruits, if you buy it from a wholesale-retail shop you will find a 20 per cent price difference. Some branded foods like cornflakes, are more expensive than dry fruits on a per kilogram basis. If you thought potatoes were selling at Rs 12 a kg, you are correct, but when it gets converted to branded chips, it becomes a little expensive, about Rs 300 a kg!

12. Men are bad shoppers

It is not so much of a gender issue. But the truth is men do not have much patience and that shows while shopping. So, if you are a man, realize that shops know and understand this. So things are arranged in such a way that when you are in a hurry you will end up buying the most expensive items. Look around to find cheaper items.

13. Compare prices and stores

I personally do not compare prices and stores but my wife has a degree in this! She knows which shop is good to buy vegetables, branded goods, unbranded goods. And she plans her shopping accordingly.

14. Shop in sales offers

In India, September to December months are considered as 'festive season'. This is the time when most of the shopping happens. Surprisingly, Hindus, Muslims and Christians have some festivals for which they buy new clothes during this period. So, stores generally keep a pre-festive sale in July-August and a post-festive offer in January. Use these sales to build your wardrobe. You can even get good deals!

15. Shop less frequently

The lesser the number of trips to the shop, the lesser you will buy! So, if you are making more trips to the store, it is time you reduced them.

16. Pay in cash

When you buy your day-to-day requirements with your credit card, you run the risk of paying your credit card dues late. So, for all the saving you have been doing, you may give it away in the form of interest. Cash is a good option. Besides, you tend to be more careful when making cash payments.

17. Check your bill

You should check all the statements which have a financial implication be it your credit card statement, mutual fund statement or your groceries bill. Scanners are fine, but there are possibilities of mistakes. So, you must see the bill before you pay.

18. Buy leather goods in monsoon and umbrellas in winter!

Buying goods in off season will cost you less. If it's monsoon, check out for sale on leather goods and umbrellas in winter.

Life Insurance ?

Hi
From last couple of weeks I am doing some exercise on life insurance........from this article one can know about insurance.
First of all I would like to say that every person should covered,should be compulsary at or near 40's.For the same one has to think how much one need to be covered.Go for single policy instead small pieces.It will be updated later on this issue but first of all about agents.

IT is hard to imagine finding time for paperwork that is not directly related to your profession.

Imagine thinking you are covered for medical emergencies, but realize it has not been renewed, after you get into an accident. Or waking up on your 55th birthday to realize you have let your money-back policy lapse, leaving you considerably short of your retirement target.

The key to quality insurance is not in choosing the right policy. It is in choosing the right agent.

The word agent comes from the Indian Contract Act, 1872, and is the Christian name for the woman who brings an insurance / mutual fund product to your doorstep.

Today, an agent does more than that. He takes over your insurance matters as his/ her personal responsibility.

We think it is time we brought to your attention to what not to consider in an agent during your selection process.

1. The neighbor syndrome……….

Love your neighbor, by all means. But not enough to choose him/ her blindly as your insurance agent.

Typically, if s/he has meandered in his/ her career and has decided selling insurance or mutual funds is his/ her calling that may not be sufficient to choose him / her.

2. The relative syndrome……….

Sometimes, it doesn't pay to keep it in the family. Brother-in-law, sister-in-law, father-in-law are great as relatives but not necessarily the best agents. Unless, of course, they have a solid business painstakingly built over time.

3. The time factor……….

People in the business for a long time are a sound bet. In some cases, though, it might mean they come with biased notions. For example, many insurance agents say, 'private companies may not pay the claim', which is not true.

Private companies are reputed and come with strong partners. If they decide to leave, they will sell their portfolio to an Indian company.

4. The boss's wife……….

This is a tough one. I have absolutely no advice to offer on this. Play it by the ear, or update your resume!

5. The client's wife……….

This one is more manageable. While it may be easy to keep your client happy by giving him your business in return of his, it will be better in the long run if you keep the brownie points to the Diwali gift level.

6. The trusted bank……….

They know the exact amount you have deposited. They know where you eat, how you travel, what school your kids go to, which credit card you have. But that is where it stops. They need not be the best bet to plan your finances, so be careful.

7. The term insurance avoider……….

Most agents omit term insurance. That is not to say it is the best, or most suitable, for you, but your agent must offer it to you, just as s/he should offer a top up in a unit-linked plan or single premium products. S/he should give you the choices and a complete menu of products so you can make an informed decision.

8. The lemon seller………….

This is not actually the nimbu (lemon) vendor who comes to your doorstep. This is the agent/ bank/ advisor who sold you a plan that someone knowledgeable called a lemon.

If you have been had once, that is enough. Do not repeat it.

If you actually find someone who does not fall into any of the above type, to escape all these loops, hang on to him for dear life. Believe me; she is worth his/ her weight in gold....

Maths !! (4)

9 x 9 + 7 = 88
98 x 9 + 6 = 888
987 x 9 + 5 = 8888
9876 x 9 + 4 = 88888
98765 x 9 + 3 = 888888
987654 x 9 + 2 = 8888888
9876543 x 9 + 1 = 88888888
98765432 x 9 + 0 = 888888888

Maths ! (3)

1 x 9 + 2 = 11
12 x 9 + 3 = 111
123 x 9 + 4 = 1111
1234 x 9 + 5 = 11111
12345 x 9 + 6 = 111111
123456 x 9 + 7 = 1111111
1234567 x 9 + 8 = 11111111
12345678 x 9 + 9 = 111111111
123456789 x 9 +10= 1111111111

Maths ! (2)

1 x 8 + 1 = 9
12 x 8 + 2 = 98
123 x 8 + 3 = 987
1234 x 8 + 4 = 9876
12345 x 8 + 5 = 98765
123456 x 8 + 6 = 987654
1234567 x 8 + 7 = 9876543
12345678 x 8 + 8 = 98765432
123456789 x 8 + 9 = 987654321

Magic or Maths ??

1 x 1 = 1
11 x 11 = 121
111 x 111 = 12321
1111 x 1111 = 1234321
11111 x 11111 = 123454321
111111 x 111111 = 12345654321
1111111 x 1111111 = 1234567654321
11111111 x 11111111 = 123456787654321
111111111 x 111111111=123456789 87654321

Friend !!

"Give thousand chances to your enemy to become your friend, But don't give a single chance to your friend to become your enemy"

How much men / women can earn? A nd how they live happily ??

======= Equation 2


Men = eat + sleep + earn money
Donkeys = eat + sleep

Therefore,
Men = Donkeys + earn money

Therefore,
Men - earn money = Donkeys

In other words,
Men that don't earn money = Donkeys


======= Equation 3

Women = eat + sleep + spend
Donkeys = eat + sleep

Therefore,
Women = Donkeys + spend

Therefore,
Women - spend = Donkeys

In other words,
Women that don't spend = Donkeys


======= To Conclude:

From Equation 2 and Equation 3
Men that don't earn money = Women that don't spend.

So, Men earn money not to let women become Donkeys! (Postulate 1)

And, Women spend not to let men become Donkeys! (Postulate 2)

So, we have?
Men + Women = Donkeys + earn money + Donkeys + spend money

Therefore from Postulates 1 and 2, we can conclude
Man + Woman = 2 Donkeys that live happily together!