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Sheet1 Time value of money a. Finding FV Investment (PV) $1,000 Interest rate (I) 12% Number of years (N) 6 Formula Future value (FV) ERROR:#N/A b. Creating a table with FVs at various interest rates...

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Sheet1
    Time value of money
    a. Finding FV
    Investment (PV)    $1,000
    Interest rate (I)    12%
    Number of years (N)    6    Formula
    Future value (FV)        ERROR:#N/A
    b. Creating a table with FVs at various interest rates and time periods using Data Table                            Formulas
    Year (B6)    Interest Rate (B5)                        Year (B6)    Interest Rate (B5)
        0%    6%    25%                ERROR:#N/A    0%    6%    25%
    0                            0    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    1                            1    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    2                            2    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    3                            3    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    4                            4    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    5                            5    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    Creating a graph with years on the horizontal axis and FV on the vertical axis
    c. Finding PV
    Future value (FV)        $1,000
    Discount rate (I)        12%
    Number of years (N)        6    Formulas
    Present value (PV)            ERROR:#N/A
    d. Finding the rate of return provided by the security
    Cost of security (PV)        $1,000
    Future value of security (FV)        $2,000
    Number of years (N)        6
    Rate of return (I)            ERROR:#N/A
    e. Calculating the number of years required to double the population
    Cu
ent population in millions (PV)        37.6
    Growth rate (I)        4%
    Doubled population in millions (FV)            ERROR:#N/A
    Number of years required to double (N)            ERROR:#N/A
    f. Finding the PV and FV of an ordinary annuity
    Annuity (PMT)        $1,000
    Interest rate (I)        18%
    Number of years (N)        6
    Present value of ordinary annuity (PV)            ERROR:#N/A
    Future value of ordinary annuity (FV)            ERROR:#N/A
    g. Recalculating the PV and FV for part f if the annuity is an annuity due
    Present value of annuity due (PV)            ERROR:#N/A
    Future value of annuity due (FV)            ERROR:#N/A
    h. Recalculating the PV and the FV for parts a and c if the interest rate is semiannually compounded
    Future value (FV)            ERROR:#N/A
    Present value (PV)            ERROR:#N/A
    i. Finding the annual payments for an ordinary annuity and an annuity due
    Present value (PV)        $1,000
    Discount rate (I)        10%
    Number of years (N)        12
    Annual payment for ordinary annuity (PMT1)            ERROR:#N/A
    Annual payment for annuity due (PMT2)            ERROR:#N/A
    j. Finding the PV and the FV of an investment that makes the following end-of-year payments
    Year    Payment
    1    $200
    2    $300
    3    $500
    Interest rate (I)        10%
    Present value of investment (PV)            ERROR:#N/A
    Future value of investment (FV)            ERROR:#N/A
    k. Five banks offer the same nominal rate on deposits, but A pays interest annually, B pays semiannually, C pays quarterly, D pays monthly, and E pays daily.
    (1) Calculating the effective annual rate for each bank and the future values of the deposit at the end of 1 year and 2 years
    Nominal rate (INOM)    8%
    Deposit (PV)    $3,000
    Number of days per year    365
                                Formulas
        A    B    C    D    E            A    B    C    D    E
    EAR                            EAR    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    FV after 1 year                            FV after 1 year    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    FV after 2 years                            FV after 2 years    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    (2) Calculating the nominal rates that will cause all of the banks to provide the same effective annual rate as Bank A
        B    C    D    E                B    C    D    E
    Nominal rate (INOM)                            Nominal rate (INOM)    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    (3) Calculating the amount of payment to be made annually for A, semiannually for B, quarterly for C, monthly for D, and daily for E
    Needed amount (FV)    $3,000
    Number of years (N)    1
        A    B    C    D    E            A    B    C    D    E
    Payment (PMT)                            Payment (PMT)    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    l. Setting up the amortization schedule
    Original amount of mortgage (PV)        $14,000
    Interest rate (I)        10%
    Term to maturity, years (N)        4
                Formula
    Annual payment (PMT)            ERROR:#N/A
                                Formulas
    Year    Beginning Balance    Payment    Interest    Repayment of Principal    Ending Balance        Year    Beginning Balance    Payment    Interest    Repayment of Principal    Ending Balance
    1                            1    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    2                            2    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    3                            3    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    4                            4    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A    ERROR:#N/A
    Creating a graph that shows how the payments are divided between interest and principal repayment over time

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Answered Same Day Sep 05, 2021

Solution

Akshay Kumar answered on Sep 06 2021
160 Votes
Sheet1
    Time value of money
    a. Finding FV
    Investment (PV)    $1,000
    Interest rate (I)    12%
    Number of years (N)    6    Formula
    Future value (FV)    $1,973.82    =-FV(B5,B6,,B4)
    b. Creating a table with FVs at various interest rates and time periods using Data Table                            Formulas
    Year (B6)    Interest Rate (B5)                        Year (B6)    Interest Rate (B5)
    $1,973.82    0%    6%    25%                =B7    0%    6%    25%
    0    $1,000.00    $1,000.00    $1,000.00                0    {=TABLE(B5,B6)}    {=TABLE(B5,B6)}    {=TABLE(B5,B6)}
    1    $1,000.00    $1,060.00    $1,250.00                1    {=TABLE(B5,B6)}    {=TABLE(B5,B6)}    {=TABLE(B5,B6)}
    2    $1,000.00    $1,123.60    $1,562.50                2    {=TABLE(B5,B6)}    {=TABLE(B5,B6)}    {=TABLE(B5,B6)}
    3    $1,000.00    $1,191.02    $1,953.13                3    {=TABLE(B5,B6)}    {=TABLE(B5,B6)}    {=TABLE(B5,B6)}
    4    $1,000.00    $1,262.48    $2,441.41                4    {=TABLE(B5,B6)}    {=TABLE(B5,B6)}    {=TABLE(B5,B6)}
    5    $1,000.00    $1,338.23    $3,051.76                5    {=TABLE(B5,B6)}    {=TABLE(B5,B6)}    {=TABLE(B5,B6)}
    Creating a graph with years on the horizontal axis and FV on the vertical axis
    c. Finding PV
    Future value (FV)        $1,000
    Discount rate (I)        12%
    Number of years (N)        6    Formulas
    Present value (PV)        $506.63    =-PV(C41,C42,,C40)
    d. Finding the rate of return provided by the security
    Cost of security (PV)        $1,000
    Future value of security (FV)        $2,000
    Number of years (N)        6
    Rate of return (I)        12.25%    =RATE(C48,,C46,-C47)
    e. Calculating the number of years required to double the population
    Cu
ent population in millions (PV)        37.6
    Growth rate (I)        4%
    Doubled population in millions (FV)        75.2    =C52*2
    Number of years required to double (N)        18    =NPER(C53,,C52,-C54)
    f. Finding the PV and FV of an ordinary annuity
    Annuity (PMT)        $1,000
    Interest rate (I)        18%
    Number of years (N)        6
    Present value of ordinary annuity...
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