Question

Insert ome Draw Page Layout Formulas Data Review View X Calibri (Body) A A 12 General Paste I U A- $% 9 Recover Unsaved Workbooks. We were able to save changes to one or more files. Do you want to recove Part I: You have just won the state lottery and have two choices for collect fx 1 X A D E F Part I: You have just won the state lottery and have two choices for collecting your winnings. You can collect $500,000 (Option 1) today or receive $100,000 (Option 2) per year for the next five years. A financial analyst has told you that you can earn 6 % on your investments. Which option would you choose? N (period of time) (Interest) PV (Present Value B FV (Future Value) PMT (Annuity) 1 2 Part ll: You have decided that you would like to buy a house in 10 years and will need a down payment of 13 $70,000. How much do you need to save each year if your savings account returns an interest rate of 2 % 14 15 N (period of time) 16 1 (Interest) 17 PV (Present Value 18 FV (Future Value) 19 PMT (Annuity) 20 21 22 Part Ill: You are 25 years old and decide to contribute the maximum allowable amount to your 401k each year 23 $19,000. If your 401k earns 7% each year, what will your balance be when you turn 55 years old? 24 25 N (period of time) 26 (Interest) 27 PV (Present Value 28 FV (Future Value) 29 PMT (Annuity) 30 31 TMV Calcs Loan Amortization Bond Valuation +

Answer 1

Part I:

We are given the following information:

PMT	$        1,00,000.00
I	6.00%
N	5

We need to solve the following equation to arrive at the required PV

PV = PMT x 1-(1+1)-N

PV = 100000 x 1 – (1+0.06) - 0.06

PV = 421236.38

Excel screen shots:

А 6% 5 N 6 7 PV 8 FV 9 PMT 4,21,236.38 $ $ $ 1,00,000.00 10

0.06 --PV(B6, B5, B9,B8) 5 N 6 7 PV 8 FV 9 PMT 10 100000

Part II

We are given the following information:

I	2.00%
N	10
FV	$70,000.00

We need to solve the following equation to arrive at the required PMT

(1+r)" - 1 FV = PMT

70000 = PMTX (1 + 0.02)10 - 1 0.02

PMT =6,392.86

Excel screen shots:

B35 ДА 13 14 0.02 2% 14 15 N 16 17 PV 18 FV 19 PM 15 N 161 17 PV 18 FV 19 PMT 70000 --PMT(B16,B15,817,318) $ $ 70,000.00 6,392.86

Part III

We are given the following information:

PMT	$19,000.00
I	7.00%
N	30

We need to solve the following equation to arrive at the required FV

FV = PMTX (1+1)^-1

FV = 19000 x (1 +0.07)30 - 1 0.07

FV = 1794754.94

A 0.07 25 N 30 26 D7% 27 PV 28 FV $ 17,94,754.94 29 PMT $ 19,000.00 30 27 PV 28 FV 29 PMT --FV(B26, B25,B29,B27,) 19000