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using excel, determine the future value of an amount deposited today, given an interest rate and the number of time periods. Be sure to use compound interest (interest rate applies to both principal and interest previously earned) versus simple interest (interest rate applies to only the principal).Suppose you currently have $10,000 and plan to purchase a 5-year certificate of deposit (CD) at your local bank that pays 4% interest, compounded annually. How much will you have when the CD matures? How would your answer change if the interest rate were 5%, or 6%, or 20%? Given the interest rate of 4%, how would your answer change if the CD term were 2-years or 3-years, or 10-years?

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Lelia Lubowitz
Lelia LubowitzLv2
20 Aug 2019

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home / study / questions and answers / business / finance / manually calculate the value of the investment, ... Your question has been answered! Rate it below. Let us know if you got a helpful answer. . Question please give the formula for each question. I didn't understand how you got your answers to these questions. thanks. Manually calculate the value of the investment, show each years calculation. How much would a $1,000 investment be worth at the end of 3 years assuming a rate of 5%., Calculate the future value. Principal invested today-$1,000 at 7% rate in 8 years., Calculate the present value. Principle future value- $10,000 at a rate of 6% for 16 years., Calculate the present value of annuity of receiving $5.00 each year for the next 12 years with interest rate of 7%., Calculate the future value of annuity of investing $6,000 each year starting now for 10 years at 5% interest rate., How much would you pay today to receive $15,000 in 8 years? Assume a 5% interest rate., How much would your CD of $1,000 be worth in 6 years at an interest rate of 4%?, How much would you pay today for an investment in which you would receive $5,000 each year for the next 7 years? Assume an interest rate of 6%., If you save $10,000 per year for the 4 years assuming an interest rate of 7%, how much money would you have?, Suppose you win a small lottery. You can receive $9,000 now or receive $2,100 a year for the next 5 years. Assume 6% interest rate. Which method would be the best choice?, Calculate the effective annual rate of 12% assuming quarterly compounding,

CAN SOMEONE LET ME KNOW IF I DID THESE RIGHT?? PLEASE

1. What is the effective rate of interest for an investment paying 18% compounded monthly?

Effective rate of interest= (1+r)^n-1

r= 18% or .18; compounded monthly= 0.18/12

N= no of period ie 12

Effective rate r= (1+.18/12)^12-1

= 0.1956 ie 19.56%

2. If you want to buy a $25,000 car in 5 years, what single amount must you invest now at 10% compounded quarterly to have the money to pay cash?

Fv= PV(1+i)^n

Fv= 25,000 n=5 years so 5*4= 20 periods; r = 10% compounded quarterly ie .10/4

25,000=PV(1+.10/4)^20

25,000= PV (4.10/4)^20

PV= (25,000/1.025)^20

PV=$15,256.77

3. What is the present value of $50,000, 4 years from now at 12% interest compounded monthly?

Fv= Pv (1+r)^n

Fv=50,000; Pv?; n= 4 years compounded monthly ie 48; R= 12% compounded monthly ie .12/12

50,000= PV (1+.12/12)^48

PV=50,000/(1.01)^48

PV=$31,013.02

4. What is the future value of $5,000 in 15 years if you can earn 12% interest compounded semi-annually?

Fv=PV(1+i)^n

Fv=5,000; n=15 years semi annually= 30 periods; I=12% compounded semi annually=.12/2

5,000= PV (1+.12/2)^30

PV=5,000(1.06)^30

PV=$28,717.46

5. What is the future value of $800 deposited annually at 9% interest for 25 years if the deposits are made at the end of the period? And, if the deposits are made at the beginning of the period?

FV(end)= PMT[(1+i)^n-1)/i] (Ordinary annuity)

FV= $800; i=9% or .09; n=25 years

Fv+800[(1+0.09)^25-1)/0.09

FV=$67,760.72

FV=(beginning)= PMT[((1+i)^n-1)/i](1+r)

FV=$800; I=9% or 0.09; n=25 years

FV=800[(1+0.09)^25-1)/0.09)(1+0.09)

FV=$73,859.18

6. Using the information from the previous problem, how much more interest is earned from the annuity due than from the ordinary annuity?

Annuity due= annuity (beginning) - ordinary annuity

=$73,859.18-$67,760.72= $6,098.46

7. How much must be deposited now in order to withdraw $15,000 at the end of each year for 30 years, if interest is 11% compounded annually?

Annuity the end of each year= 15,000

N=30 years; r= 11% compounded annually

To find PV of an annuity of $15,000 @ the end of each of the year

PV= PMT [1-(I+i)^-n/i

PV=15,000[1-(I+0.11)^-30/0.11]

PV= PMT[1-(I+i)^-n/i

=$130,406.89

8. If you want $2,000,000 in your retirement fund in 45 years, and you can earn 14% compounded annually, what will be your annual contribution? How much interest will you earn?

FV= 2,000,000; N= 45 years; i= 14% compounded annually

We have the FV of an annuity รขย€ย“ to find the annuity

FV= PMT [(I+i)^n-1)/i]

2,000,000=PMT [((1+0.14)^45-1)/(0.14]

2,000,000= PMT [2590.5648]

PMT=$772.03

9. If you retire with $1,375,000 in your retirement fund and plan to live for 20 years, how much can you withdraw every year if your investment earns 10%?

PV= 1,375,000 n=20 years i=10%

To find annuity given the PV

PV=PMT [1-(1+i)^-n/I]

1,375,000= PMT [1-(1+0.10)^-20/0.10)

PMT(yearly withdrawl) =$161,506.98

10. How much more interest is earned from ordinary annuity payments of $6,000 per year for 25 years if you can increase your rate of interest from 6% to 9%?

PMT=$6,000 per year; n=25 years; i=6% to 9%

Interest at 6%

FV= PMT [((1+r)^25-1)/0.06]

FV= 6,000[((1+0.06)^25-1)/0.06]

=$329,187.07

Interest at 9%

FV=6,000[(91+0.09)25-1)/0.09]

= $508,205.38

More earned interest 9%- 6% = $508,209.38 - $329,187.07 = $179,018.31

Problem 1: $3,000 is invested at 7.2% interest. Find the total amount (A) at the end of 5 years if:
a.) Simple interest is earned. (see the "Simple Interest Example" tab)
b.) Interest is compounded annually (see the "Compound Interest Illustration" tab)
c.) Interest is compounded quarterly (see the "Other Compounding Periods" tab)
d.) Interest is compounded monthly (see the "Other Compounding Periods" tab)
Problem 2: A department store charges 12% interest on the unpaid balance of customer charge accounts.
A customer owes $135, and the bill goes unpaid for 4 months. How much will the customer have to
repay after 4 months? Interest is compounded monthly (note that the 12% is an annual rate). (see the "Other Compounding Periods" tab)
Problem 3: A typical family of four spends approximately $600 per month for food. Food costs are
predicted to rise by 4.8% per year for the next 5 years. In five years, how much should
the family budget per month for food? Treat this as compound annual growth. (see the "Compound Interest Illustration" tab)
(assume annual compounding)
Problem 4a: A couple plans to begin saving money for a down payment toward the purchase of a home.
They plan to purchase a home 4 years from now. Right now, home prices are predicted
to rise by 5% per year for the next 5 years. If this prediction is accurate, how much
can this couple expect to pay in 4 years for a home that is currently valued at $210,000?
(what will be the total sales price in 4 years of a home worth $210,000 today?) (see the "Compound Interest Illustration" tab)
Problem 4b: The couple wants to have a 20% down payment on the purchase price in 4 years. Suppose they
have found a mutual fund that earns an average of 8% per year. How much should they invest in the
mutual fund today in order to have enough for a down payment in 4 years?
Assume annual compounding.
(Find the down payment first - that will be their "A" or future value of what they will invest)
(see the "Other Problem Types" tab - we are trying to find the principal or present value to be invested to grow to the down payment amount)
Problem 5: An electric company predicts that the cost of electricity will rise at the rate of 2% per
year for the next ten years. If the average monthly electricity for consumers in this area
is $225, predict the monthly amount that consumers can expect to pay 10 years from now.
(see the "Compound Interest Illustration" tab)

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