Assignment

Module 7

Chapter 8

Exercises and Problems

PLEASE NOTE: THAT YOU MUST USE THE EXCEL FORMULAS FOR CALCULATING THE TIME VAUE OF MONEY FOR THESE PROBLEMS—PLEASE NOTE THAT NOT USING EXCEL WILL RESULT IN A POINT DEDUCTION. Please refer to my notes in the module resources if you are unsure of how to do that.

1. Please enter the information for the following problem below. I am not asking you to solve the problem, I just want you to write down what you would enter for each part, and then I want you to write out what the formula would be in excel using each and every part. I want the formula to find out how much I need to invest today to have a dollar in 5 years if it was invested at 2% compounded annually.

PV

FV

PMT Not applicable this week as we will cover next week in annuities, so please enter 0 in the formula below.

NPER

RATE

TYPE

Excel formula =__(__, __, 0, __, __)

2. How would the numbers change if it was compounded monthly?

PV

FV

PMT Not applicable this week as we will cover next week in annuities, so please enter 0 in the formula below.

NPER

RATE

TYPE

Excel formula =__(__, __, 0, __, __)

3. You deposit $ 760 in an account one time that compounds monthly at 2 percent. How much will you have in your account at the end of 10 years?

4. A balloon payment of $ 21,000 on your house is due in 10 years. If you can earn an average of 5 percent per year for the 10- year period, how much must you place into an account today to have the $ 21,000 in 10 years?

5. If you want an effective rate of 5 percent, what is an acceptable quoted rate if money is compounded monthly?

6. If inflation averages 4 percent per year, how much purchasing power will $ 1.00 loose in 10 years?

7. At the beginning of each year, you deposit the following into a growth mutual fund that earns 6 percent per year: Year Deposit

1 5,000.00

2 7,500.00

3 4,500.00

4 5,500.00

5 6,200.00

Total 28,700.00?

How much should the fund be worth at the end of 5 years?

8. Rochelle Kotter wants to attend a university 5 years from now. She will need $ 88,000. Assume Rochelle’s bank pays 3 percent interest for a 5- year CD compounded monthly. What must Rochelle deposit today to accumulate $ 88,000 in 5 years?

Points 12.5 each question