Question

Showing calculations for each

Selected Interest Rate 4.0% The Concept of Future Value Now 1 2 Year-by-year Compound Interest Calculation Invest Money Today and 'Let it Ride' What does it grow to be in 5 years? @ Problem 1 4.0% $ 1,000.0 [create excel formula calculations for each of the five cells) The Concept of Future Value Now 1 5 Compounding Formula Note: All Year 5 numbers should all be the same number Problems 2 and 3 Invest Money Today and 'Let it Ride' What does it grow to be in 5 years? @ 4.0% $ 1,000.0 (Create Your Own Cell Math] [Using Excel Ex] Now The Concept of Present Value What is the Present Value of your Year 5 answer Above? Problems 4 and Calculate Present Value Here Insert Year 5 Answer From Above Here What is the Present Value? @ 4.0% [Create Your Own Cell Math] [Using Excel Ex]

Answer 1

Problem 1]

Value in each year = previous year value * (1 + interest rate)

Problem 2]

Future value = present value * (1 + interest rate)^{number of years}

Problem 3]

Future value is calculated using FV function in Excel :

rate= interest rate

nper = number of years

pmt = 0

pv = -amount invested (This is entered with a negative sign because it is a payment)

Problem 4]

present value = future value / (1 + interest rate)^{number of years}

Problem 5]

Present value is calculated using PV function in Excel :

rate= interest rate

nper = number of years

pmt = 0

fv = -amount invested (This is entered with a negative sign because it is a payment)

B C D 1 $1,000 $1,040.00 2 $1,081.60 F 3 $1,124.86 G 4 $1,169.86 4.00% $1,216.65 A 1 Problem 1 2 3 4 Problem 2 5 Problem 3 6 Problem 4 7 Problem 5 4 4.00% .00% 4.00% 4.00% $1,000 $1,000 $1,000 $1,000 $1,216.65 $1,216.65 $1,216.65 $1,216.65

C D 12 =C2*(1+$B$2) =D2*(1+$B$2) = 2*(1+$B$2) =F2*(1+$B$2) =G2*(1+$B$2) 1000 A B 1 Problem 1 0.04 3 4 Problem 2 0.04 5 Problem 3 0.04 6 Problem 4 0.04 7 Problem 5 0.04 1000 1000 =H6/(1+B6)^5 =PV(B7,5,0,-H7) =C4*(1+B4)45 =FV(B5,5,0,-C5) =H5 =H5