Q&A: US debt crisis

The battle between the White House and Congress continues over how to raise the US debt ceiling. If the 2 August deadline is missed, the government could quickly run out of money.

Why is the debt ceiling so important?

The US government has a legal limit on how much debt it can run up – $14.3tn at present. It reached the cap in May, which means it cannot borrow any more money.

So how has America been keeping afloat since then?

Treasury secretary Tim Geithner managed to stave off default by suspending payments into two federal pension funds, pledging to repay the money once Congress has approved a higher debt ceiling.

Why can't Barack Obama just raise the debt limit?

Under the US constitution, all government borrowing has to be approved by Congress, and this has led to a protracted stalemate between Republicans and Democrats. The borrowing limit was introduced in 1917 to make it easier for the government to fund its efforts in the first world war. Since then the ceiling has been lifted numerous times – usually it is just a formality. It can also go the other way. During the 1950s economic boom, Congress voted to lower the limit twice.

So what's different this time? Why can't the two sides agree?

Since the financial crisis and recession government spending has soared while tax revenues have suffered, driving up the government's deficit. The Republicans, who control the House of Representatives, insist that the government must cut the deficit first before any agreement on raising the debt limit can be reached.

Has there been any progress in the debt talks?

Both sides accept that the deficit needs to be brought under control, but have different ideas about how to go about it. The main sticking points have been the Republicans' resistance to tax rises and calls for bigger spending cuts than have been backed by the Democrats. The Democrats also want to shield healthcare programmes for the elderly and poor from the cuts. After chaotic scenes in the House on Thursday night, Republicans called an emergency meeting for Friday morning to try to get their plan through the House.

What happens if a deal can't be agreed by Tuesday?

The US treasury estimates that funds will dry up by then, which would leave the government unable to pay its bills – such as social security payments, Medicare, military salaries and debt interest payments. The Republicans claim that the government would get by for a few more days after 2 August, but there is no doubt that the two sides need to agree a deal soon.

How have financial markets reacted?

Investors have become more nervous, and the dollar was under pressure on Friday. Moody's has put America's credit rating on negative watch.

What impact would a default have?

US treasury secretary Timothy Geithner has said a US default would have 'catastrophic' results.

 It would trigger a major global panic. Standard & Poor's has said it would slash the US credit rating from AAA (the top) to D (the bottom). That means banks would technically be barred from using US debt as collateral with central banks, although these rules could be changed.

HDFC plans IPO for insurance business in two years

Housing Development Finance Corporation(HDFC) on Friday said that it may come out with an initial public offering (IPO) for its insurance business in about two years. 

"We are planning to come up with an IPO for insurance in two years," HDFC Chairman Deepak Parekh said at the annual general meeting ( AGM )) of the company. 

Parekh said the new Insurance Regulatory and Development Authority (IRDA) guidelines that allow life insurers to float an IPO without three year profitability clause would help but said the firm would need to discuss about it with its partner Standard Life. 

He said Standard Life would have to increase its stake to 49 per cent from the current 26 per cent, so that part of its shares (the increased stake) can be offered to the investors. 


Source- Economic times

IRDA scraps profit rule for life insurance IPOs

The insurance regulator has scrapped the minimum three year profitability clause for life insurers to float initial public offerings, throwing a lifeline for many companies that would have struggled for capital. The Insurance Regulatory and Development Authority , or Irda, took the decision in a recent board meeting, two people familiar with the matter said. 

The decision to do away with the requirement, which was part of the draft guidelines for IPOs, follows lobbying by insurance firms that the absence of higher foreign investment and access to public funds could cripple their businesses. Valuing insurance companies in India may become tricky with some arguing they are at a growth stage and the market has huge potential. While insurers may look for high valuations due to market potential, their losses could be talked down as it happened in the case of dotcom companies. The insurance regulator had prescribed a minimum embedded value for which the insurers objected to and sought flexibility. 


SOURCE-http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/irda-scraps-profit-rule-for-life-insurance-ipos/articleshow/9131020.cms

Industry welcomes draft Bill on microfinance

The government on Wednesday released the draft of a new Bill to govern microfinance institutions (MFIs) that will, if approved in its entirety, take them outside the purview of state-level legislation, including the Andhra Pradesh law that has thrown the industry into crisis.

The Microfinance Institutions (Development and Regulation) Bill gives more powers to the Reserve Bank of India (RBI) to regulate microlenders. It will cover all MFIs, including the smaller ones. MFIs give tiny loans to poor borrowers at around 24% interest. The Bill has to be approved by the cabinet and Parliament before it becomes law.

More than a quarter of the industry is concentrated in Andhra Pradesh, which promulgated a law in October restricting operations of microlenders. This led to a drastic rise in bad loans as borrowers stopped repaying debt. Banks in turn stopped lending to MFIs. The state law, which had been preceded by an ordinance, followed reports of coercion in recovering loans that allegedly led to suicides.

Early this year, RBI issued regulations to govern MFIs operating as non-banking financial companies, based on the recommendations of an expert committee headed by noted chartered accountant Y.H. Malegam. The new rules capped the interest rate MFIs can charge at 26% and made a minimum two-year tenure mandatory for all loans above `15,000.

While the panel looked into operational issues, the new Bill provides an overarching framework, signalling the government’s stand on the importance of the industry, said Mathew Titus, executive director of Sa-Dhan, an association of MFIs.

In what could affect the larger institutions, the Bill says that any MFI that becomes systemically important will have to register itself under the Companies Act.

The draft Bill also proposes the setting up of a Microfinance Development Council, which will advise the government on policies and programmes required for the development of the sector.

The members of the council will represent the industry, the government, RBI, the National Housing Bank, the National Bank for Agriculture and Rural Development (Nabard) and the Small Industries Development Bank of India. The council will also look into establishing credit information bureaus for the creation of a database of clients who avail of microfinance services from various agencies.

The draft legislation proposes to establish state advisory councils for close coordination between the states and the Centre with regard to the working of the industry.

The Bill also envisages a Microfinance Development Fund to be constituted by RBI to provide loans, refinance, grants, seed capital or any other financial assistance to any MFI and to which all government grants received and fees payable for this sector will go. The Bill will also empower RBI to ask MFIs to cease their activities if warranted upon inspection of the accounts. It will also be able to cancel registration granted to the MFI.

It also gives RBI the option of delegating its powers to Nabard in respect of any MFI or class of MFI. The earlier draft of the Bill had envisaged Nabard as the regulator for smaller MFIs, a move that was opposed by RBI.

Courtesy-http://www.livemint.com/2011/07/06224522/Industry-welcomes-draft-Bill-o.html?atype=tp

Allianz owns 20% in Berkshire India, documents show

German insurance company Allianz SE, which owns 26% of Bajaj Allianz, is also a minority stakeholder in Berkshire India, according to the company’s filings with the Registrar of Companies.

Allianz SE holds 45 lakh shares, or 20% of the share capital of Berkshire India.

The remainder is owned by BHG Structured Settlements, a Berkshire Hathaway company.

Kamesh Goyal, chief executive officer of Allianz Asia Pacific, was one of the first directors of Berkshire India, but had stepped down from the board before it became a corporate agent. Another director was Debadatta Sengupta who too is no longer with the board, said a Berkshire India spokesperson. Among the other directors were Ajit Jain from Berkshire Hathaway’s reinsurance business, and Forrest N Krutter and Kara Raiguel, also from the Berkshire Hathaway Group.

The stock of Bajaj Finserv, which holds 74% stake in Bajaj Allianz, has risen more than 20% since its tie-up with Berkshire was announced.

Berkshire India declined to comment on Allianz’s stake in the company.

The memorandum of association for Berkshire India suggests the company would primarily act as distributors or advisors in the insurance segment. The main objects of the company on incorporation have been listed as ‘soliciting or procuring insurance business’, acting as an ‘insurance agent, corporate agent and/or insurance broker’, acting as ‘assessors, values and surveyors,’ or ‘advisors and consultants’.

Berkshire India had on Wednesday issued a statement saying it would act as a corporate agent for Bajaj Allianz General Insurance.

The announcement followed months of speculation about Warren Buffett picking up stake in Bajaj Finserv, which the company has denied.



Reduce tariff barriers, FDI curbs to fix infrastructure: Gary Locke

India must reduce its tariff and non-tariff barriers and consider lifting restrictions on foreign direct investment (FDI) in several areas to help it secure funds to help fix its infrastructure, U.S. Commerce Secretary Gary Locke said here on Friday. Addressing a media roundtable here, Mr. Locke said that allowing more FDI in sectors like infrastructure, banking and insurance and even the retail sector would greatly help these sectors get access to more funds and lower their costs. “Only 2 per cent of the roads are paved in India. It is estimated that India requires up to $1.2 trillion between now and 2030 to repair and upgrade its infrastructure which involves an eight-fold increase in per capita spending. That is clearly beyond the capability of India and that is where FDI will help.''

Although India has made progress in opening its markets to U.S. companies, a lot more remains to be done in this direction.

Speaking on the hike in the U.S. visa fee, Mr. Locke insisted that it was a temporary measure which applied to only certain size of business. “It is mainly targeted at technology companies with more than half their workers on H1 visas. It is however, only temporary and will expire automatically by 2015.''

Govt public debt in Q3 up 4% at Rs 28,62,624cr

The total public debt of the Government increased by 4 per cent to Rs 28,62,624 crore during the third quarter of the current financial year from Rs 27,53,378 crore in the previous quarter.

The Government's debt constitutes both internal and external debt.

While the Government's papers of various maturities period, including the securities issued to international financial institutions, are classified as internal debt, the external debt are that from multilateral and bilateral agencies, including IMF . Internal debt in Q3 constituted 89.6 per cent of public debt, compared to 89.2 per cent at end of the second quarter.

The outstanding internal debt of the Government stood at Rs 25,64,983 crore in Q3, thereby constituting 36.6 per cent of GDP ( Gross Domestic Product )) compared with 35 per cent in the previous quarter.

The report further said all the key deficit indicators of the central Government during April-November 2010, as per centage of budget estimates (BE), were lower than their levels during the corresponding period of the previous year on account of higher revenue collections. On the foreign capital inflows, the report said, the inflows on account of foreign investment were considerably higher during the months of September and October 2010 mainly on account of increase in portfolio investment by FIIs.

The rupee appreciated during the quarter from Rs 44.93 per USD at end-Sep 2010 to Rs 44.81 per USD at end-December 2010, the report said.

IPO guidelines for life insurers to be ready this fiscal: IRDA

 Insurance watchdog Irda today said the guidelines for public float of life insurance companies will be ready this fiscal, while the non-life may take more time. In October last year, market regulator Sebi had approved life insurance companies to issue IPOs.

As per the draft guideline compiled by Irda, insurance companies that are in operation for the last 10 years would only be eligible for coming out with IPOs.

Also, the present IPO guidelines of Sebi requires a three years track record of profit for a company to float a public issue.

However, the non-life insurance companies will have to wait a few months to hit the capital market as Irda is in the process of making a formal proposal to Sebi.

Several private sector insurers, including Reliance Life and HDFC Standard Life, have already shown interest in tapping the capital market to augment their resource base.

Though HDFC Standard Life has completed 10 years of operations, Reliance Life does not meet this criteria.

As per the disclosure norms in offer document mandated by Sebi, the insurers would have to come up with disclosure of risk factors specific to the companies.

Also the offer document would have a glossary of terms used in the insurance sector.

Currently, most of the 22 private life insurers and 17 non-life players have foreign partners. The Insurance Act caps foreign direct investment at 26 per cent.

LIC reduces stake in HUL to 6.95 per cent

Hindustan Unilever (HUL) stated that by selling its share in the market, the insurance firm,Life Insurance Corporation of India (LIC) has lessened its stake in the company to 6.949 percent.As on November 21, 2007, LIC had held 8.949 per cent in the HUL but, has sold 45,935,297 shares aggregating to 2 per cent stake in HUL at a value of Rs 1,254.6 crore,

Meanwhile, HUL also said that the shares were sold over a period of 4 years from November 21, 2007 till January 6, 2011. LIC now has 151,642,638 shares or 6.949 per cent stake in HUL after the share sale.

The Life Insurance Corporation of India (LIC) is the largest state-owned life insurance company in India, and also the country's largest investor. It is fully owned by the Government of India. It also funds close to 24.6% of the Indian Government's expenses. It has assets estimated of 9.31 trillion (US$202.03 billion).

It was founded in 1956 with the merger of more than 200 insurance companies and provident societies.

http://money.oneindia.in/news/2011/01/18/lic-reduces-stake-hul.html



RBI `desperate' to rein in inflation surge

The Reserve Bank of India is "desperate" to control inflation, said its Governor, Dr D. Subbarao, on Monday. Pointing out that a lot of other countries were still flirting with deflation while India is having a surge in inflation, Dr Subbarao said- :"When I meet other central bank governors, they tell me `why don't you give us a bit of your inflation.' That's how desperately they want some inflation and how desperate we are to control inflation."

The Governor's expression of concern on the rising inflation, coming as it does in the run-p to the third quarter review of the monetary policy scheduled for January 25, indicates that the central bank could raise key shortterm interest rates by at least 25 basis points to head-off the rising tide of inflation, say analysts.

In December, the Wholesale Price Index (WPI) based inflation surged to 8.43 per cent from 7.48 per cent in the previous month, mainly driven by the runaway increase in food prices. In its midquarter review of the monetary policy last month, the RBI said that the risk to its projection of 5.5 per cent inflation by March 2011 is on the upside. Speaking at a function at the Indira Gandhi Institute of Development Research, the Governor said the challenge for the RBI was to calibrate monetary policy by taking into account the demands of inflation management and the demands of supportive recovery.

INDUSTRIAL GROWTH DIPS

The dilemma facing the central bank in calibrating monetary policy is borne out by the fact that even as the WPI inflation is much above its comfort level of 5.5 per cent, industrial growth plummeted to an 18-month low of 2.7 per cent in November (against 11.3 per cent for the same month of last fiscal).  Any further monetary tightening measure aimed at inflation control now runs the risk of derailing growth.

STRUCTURAL FACTORS

Though food inflation, based on the annual WPI, eased marginally to 16.91 per cent in the week ended January 1 (as against the previous week's annual rise of 18.32 per cent), the pace of decline has been slower than expected largely due to structural factors. The RBI, in its mid-quarter review, had warned that there is a risk that rising international commodity prices will spill over into domestic inflation. Going forward, rising domestic input costs for the manufacturing sector combined with aggregate demand pressures could weigh on domestic inflation.

13 changes in I-T Act needed before IFRS convergence

Panel wants nod to keep two accounts in 1st yr.

The finance ministry will have to make 13 changes in the Income Tax Act of 1961 if it has to resolve all direct tax issues arising out of the convergence of Indian accounting standards with International Financial Reporting Standards (IFRS), an expert committee has said.

The group, set up by the country’s audit standard setting body — Institute of Chartered Accountants of India(ICAI) — may ask the ministry to either amend the rules or allow industry to maintain parallel books of

accounts in the initial year of transition (2011-12).The group, which comprises chartered accountants and Central Board of Direct Taxes officials, will submit its report to the ministries of corporate affairs and finance, is learnt.

Harmonisation of the provisions of minimum alternate tax, issues related to tax deducted at source, tax

differences arising out of recognition of constructive liabilities or obligations as against the current practice of recognising only legally enforceable liabilities, goodwill depreciation or depreciation of intangible assets, mark-to-market treatment, etc, are some of the issues highlighted by the committee.

The committee discarded the idea of applying IFRS convergence only on consolidated financial statements and allowing companies to follow existing accounting standards for standalone statements. It stated that maintenance of parallel books of accounts would also require the same effort and would be a better option.

The move comes at a time when various sections of industry are seeking a deferment of the IFRS convergence deadline set by the ministry. The ministry has been consistent in its stand that a select group of companies, put in the Phase I group, will have to follow the new Indian Accounting Standards that converge with IFRS from April 1.

The Phase I group excludes banks, insurance companies and smaller companies and has companies that are part of the National Stock Exchange’s bellwether index Nifty, the Bombay Stock Exchange’s Sensex, companies whose shares or other securities are listed on foreign stock exchanges and companies, listed or not, which have a net worth in excess of Rs 1,000 crore.

http://www.business-standard.com/india/news/13-changes-in-i-t-act-needed-before-ifrsconvergence/421925/

Only 10-year-old life cos can tap markets

 The insurance regulator may have decided to announce guidelines for equity issues by life insurance companies early next month, but companies which are not yet 10 years old will not be able to approach primary markets.

However, companies that are in existence for 10 years, but have not registered net profits for the past three consecutive years, will be able to do so through the book-building process, Irda chairman J Hari Narayan told ET.

Companies like Reliance Life Insurance and HDFC Life Insurance have expressed their intention of approaching the primary markets for raising additional funds.Given the 10-year stipulation for IPO, Reliance Life will have to wait for another year.

Reliance Life had approached the finance ministry some two years ago for allowing it to raise funds from primary markets . It wanted the ministry’s permission to skip the 10-year stipulation. Irda, it seems, is not too comfortable with the idea.

Technically, insurers will be able to approach the markets once the guidelines for equity issues by life insurance companies are out. “We hope to provide the guidelines in the next 2-3 weeks,” said Mr Narayan .

Source: http://economictimes.indiatimes.com/

Insurance companies' IPOs next fiscal as IRDA gives final touches to equity norms.

Insurance companies will be able to raise funds through public floats next fiscal with the insurance watchdog set to announce guidelines for equity issues by life insurance companies early next month.The regulator said it was still in the process of making a formal proposal to the market regulator, Securities and Exchange Board of India (SEBI), for allowing non-life insurers to issue shares to public.

In October last year, market regulator Sebi had allowed life insurance companies to issue public offers. According to the draft guidelines compiled by the regulator, only those insurance companies that are in operation for the last 10 years will be eligible for coming out with public offers.

The regulator is also working on the draft regulation for covering nuclear accidents. "We are in early stages. This involves large amount of risks. We will have to first constitute a pool, which will be part of the larger global pool (of nuclear accident insurance). That is yet to be figured out," Mr Narayan said. State-run reinsurer General Insurance Corporation (GIC) is working on the details to provide insurance protection against such accidents.

Private sector insurers such as Reliance Life and HDFC Standard Life have evinced interest in tapping the capital markets. Most of the 22 private life insurers and 17 non-life players have foreign partners. The Insurance Act caps foreign direct investment at 26%. According to Sebi, insurance companies in their offer document would have to mention a glossary of terms used in the insurance sector. The insurers will also have to come up with disclosure of risk factors specific to the companies.

Source:

http://economictimes.indiatimes.com

Shriram group to divest 20% in Shriram Capital to Sanlam

 

Shriram group plans to divest around 20 percent in its financial services business holding company, Shriram Capital, for around Rs 900 crore ($200 million) in favour of South African insurance group Sanlam.Shriram Capital is the holding company for the group companies involved in the financial services like Shriram Life Insurance , Shriram General Insurance , Shriram Transport .

 

Source:

http://economictimes.indiatimes.com

Irda allows insurers to invest in OVL, Coal Videsh bonds

The insurance regulator has allowed insurance companies to invest in bonds issued by foreign arms of ONGC and Coal India for acquiring energy assets abroad—a move that will significantly increase funds available for state energy firms, and at more attractive rates. Insurance companies have been seeking such investment avenues as they are required to invest 15% of their funds in the infrastructure sector. But this was not allowed as the Insurance Act forbids investments outside the country.

However, investments by companies such as ONGC Videsh Ltd (OVL), the overseas arm of the state-run explorer, are not seen as violations of the act as they are listed in India and returns on their investments are brought back to the country, Insurance Regulatory and Development Apart from opening up attractive investment option for insurers, the move would help OVL, which is leading the government's efforts to acquire overseas oil and gas assets to boost the country's energy security . India's largest insurance firm, Life Insurance Corporation of India (LIC) alone invests about .Rs200,000 crore across various asset classes every year.

"Participation of insurance companies will increase investors' participation impacting its price (interest rates) in our favour," OVL managing director RS Butola said. OVL had raised .Rs1,000 crore through a bond issue last year. The existing norms allow insurance companies to invest 50% in government-approved securities, 15% in infrastructure and the remaining 35% in equity and other instruments. Insurance companies can only invest in AAA or AA creditrated debt paper. Insurance firms have welcomed the move and said that liberalisation of norms in these sectors will also help in creation of a long term debt market.

NEW HORIZONS

Insurers have been seeking such investment avenues as they are required to invest 15% of their funds in the infrastructure sector. But this was not allowed as the Insurance Act forbids investments outside the country.

Source:

http://economictimes.indiatimes.com



Indian Bank to enter life insurance, restart MF biz

Public sector Indian Bank plans to venture into life insurance. It is looking at floating a consortium with domestic and foreign partners, for which it has already initiated talks. Besides, it would also appoint a consultant to advise it on re-entry into the mutual fund industry.

Indian Bank was a bancassurance partner for HDFC Life Insurance and the agreement would mature in March. Last year, the bank earned a commission of Rs 26 crore through the tie-up and was targetting Rs 40 crore this year.The new company would take another six months to materialise and would be through a consortium, wherein Indian Bank and the domestic partner would have the majority stake and the foreign partner would hold 26 per cent.

The 104-year Chennai-based Bank has more than 1,800 branches and over 19,000 staff. It has a customer base of around 200 crore. As on date, total business amounts to Rs 1.70 lakh crore. Indian Bank is one of the pioneers in the mutual fund industry. It set up its mutual fund business in 1989, which became of the top performing mutual funds in the nineties. But in 2001, the bank transferred its schemes to Tata Mutual Fund.

Source:

http://www.business-standard.com

Remove infra, policy bottlenecks to attract FDI: Assocham

Removal of infrastructure bottlenecks and policy reforms in sectors like retail and insurance will help India attract more foreign direct investment (FDI), Assocham said today.It said that sectors such as agriculture and retail, which have enormous potential for attracting FDI, need to be further liberalised. "Restructuring the land acquisition laws also facilitates more opportunities for investors.The country still has to deal with a sometimes sluggish bureaucracy," it added.

During April-November, 2010-11, FDI into the country declined by 27.4 per cent to $14.02 billion vis-a-vis the corresponding period of the previous year. However, it said if the prevailing global situation improves, India may emerge as the third-most favoured destination for FDI after China and the US. The government is mulling over liberalisation of the FDI policy in sectors like multibrand

retail and defence.



FSDC guidelines to define Finance Ministry role

Guidelines being prepared on functioning of the Financial Stability and Development Council(FSDC), a high-level body set up to sort out inter-regulatory issues, will define the role of the finance ministry and how member regulators’ autonomy is not compromised.

FSDC was formed to bring greater coordination among financial market regulators. The council is headed by the finance minister and has the Reserve Bank of India (RBI) governor and chairpersons of the Securities and Exchange Board of India, Insurance Regulatory and Development Authority and Pension Fund Regulatory and Development Authority as other members along with finance ministry officials.

According to information, the finance ministry’s role could be confined to an improving level of financial literacy and inclusion as well as devise means for doing this job, apart from being the lender of the last resort.A broad thrust of the guideline will also on FSDC handling only broader issues and ensuring that sectoral regulators continue to play their role as regulating and developing respective markets. In the first meeting of the council on last Friday in New Delhi, discussion took place regarding the formation of guidelines.

There will be a committee under the council headed by the RBI governor that will be first-level moderator of regulatory coordination. Guidelines will also decide that the council should hold minimum meetings during the year. However, the notification issued regarding FSDC suggests that the council should meet as frequent as possible.

A sub-committee or a steering committee headed by the governor can meet more frequently. This sub committee is in lieu of a high-level coordination committee, which is now dismantled.

Basic of finance part1 time value of money

Basics of Finance-part one

The Time Value of Money-

Present Value	How much you got now.
Future Value	How much what you got now grows to when compounded at a given rate

I  give you 100 dollars. You take it to the bank. They will give you 10% interest per year for 2 year.

• The Present Value = $ 100
• Future Value = $121.

FV= PV (1 + i )N

Where

• FV = Future Value
• PV = Present Value
• i = the interest rate per period
• n= the number of compounding periods

Example1 -Determine Future Value Compounded Annually
What is the future value of $34 in 5 years if the interest rate is 5%? (i=.05)

• FV= PV ( 1 + i ) ^N
• FV= $ 34 ( 1+ .05 ) ⁵
• FV= $ 34 (1.2762815)
• FV= $43.39.

Example2-Determine Present Value Compounded Annually
you can go backwards too. I will give you $1000 in 5 years. How much money should you give me now to make it fair to me? You think a good interest rate would be 6% (You just made that number up). (i=.06)

• FV= PV ( 1 + i ) ^N
• $1000 = PV ( 1 + .06) ⁵
• $1000 = PV (1.338)
• $1000 / 1.338 = PV
• $ 747.38 = PV

Example 3-Determine Present Value Compounded Monthly
Here's that last one again, but with monthly compounding instead of annual compounding. (i equals .06 divided by 12, because there are 12 months per year so 0.06/12=.005 so i=.005) 

• FV= PV ( 1 + i ) ^N
• $1000 = PV ( 1 + .005) ⁶⁰
• $1000 = PV (1.348)
• $1000 / 1.348= PV
• $741.37 = PV

Here is all about time value of money. You can calculate for half yearly compounding or quarterly compounding.

In case of half yearly compounding take n= 2* no of years

                                                                  I= annual interest/2

ALL OF THE FINANCE WORKS AROUND TIME VALUE OF MONEY

Thanks & Regards

Danish Khan