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Exploring the topic of time value of money. The project requires that you work in Excel with the provided spreadsheet. Please fill in the yellow boxes in the Excel file. In addition, type up a report in word with a separate section for the introduction (description of the project), findings (answer assignment questions, plots, etc.), and conclusion (conclusions, summary).
Future Value:
In this part, calculate the future values. Use the Excel FV function to compute the future values.
You have just made your first $5,000 contribution to your individual retirement account. Assuming you earn an annual rate of return of 9 percent and make no additional contributions, what will your account be worth when you retire in 45 years?
Calculate the future values in the table below using the FV Excel function.
|
Present value |
Years |
Interest rate |
Future value |
|
$2,950 |
8 |
14% |
? |
|
$7,500 |
15 |
6% |
? |
|
$85,300 |
19 |
8% |
? |
|
$221,600 |
24 |
4% |
? |
Present Value
In this part, calculate the present values. Use the Excel PV function to compute the present values.
You are committed to owning a $180,000 Ferrari. If you believe your mutual fund can achieve an annual return of 10 percent, and you want to buy the car in 12 years, how much must you invest today?
Calculate the present values in the table below using the PV Excel function.
|
Future value |
Years |
Interest rate |
Present value |
|
$19,500 |
15 |
6% |
? |
|
$47,390 |
8 |
12% |
? |
|
$312,200 |
12 |
11% |
? |
|
$629,380 |
26 |
13% |
? |
In this part, calculate the interest rates. Use the Excel Rate function to compute the interest rates.
In 2018, one of the first copper pennies struck at the Philadelphia mint in 1793 was sold for $300,000. What was the rate of return on this investment?
Calculate the interest rates in the table below using the Excel Rate function.
|
Present Value |
Years |
Future Value |
Interest Rate |
|
$750 |
10 |
$1,380 |
? |
|
$900 |
12 |
$1,750 |
? |
|
$16,000 |
25 |
$142,800 |
? |
|
$70,500 |
16 |
$312,900 |
? |
In this part, calculate the number of periods. Use the Excel Nper function to compute the number of periods.
You expect to receive $30,000 at graduation. You plan on investing it at 4 percent until you have $130,000. How long will you wait from now?
Calculate the number of periods in the table below using the Excel Nper function.
|
Present Value |
Interest Rate |
Future Value |
Years |
|
$190 |
7% |
$870 |
? |
|
$2,175 |
11% |
$3,590 |
? |
|
$47,850 |
10% |
$326,890 |
? |
|
$38,571 |
15% |
$213,674 |
? |
Relation between Future Value and Number of Periods
In this part, you need to examine the relation between the future value and the number of periods.
For a present value of $1,000, create a table that shows the FV at 0%, 5%, and 10% for 0, 2, 4, 6, 8, and 10 years.
In a single graph, plot the table above with years on the horizontal axis and FV on the vertical axis for each interest rate and be sure to label the y-axis, x-axis, chart title, and legend.
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