Question

Problem 5-41 a. Find the FV of $1,000 invested to eam 10% after 5 years. Answer this question by using a math formula and also by using the Excel function wizard. Now create a table that shows the FV at 0%, 5%, and 20% for 0, 1, 2, 3, 4, and 5 years. Then create a graph with years on the horizontal axis and FV on the vertical axis to display your results. c. Find the PV of $1,000 due in 5 years if the discount rate is 10%. Again, work the problem with a formula and also by using the function wizard. d. A security has a cost of $1,000 and will return $2,000 after 5 years. What rate of return does the security provide? e. Suppose California's population is 36.5 million people, and its population is expected to grow by 2% annually. How long will it take for the population to double? g. How will the PV and FV of the annuity change if it is an annuity due rather than an ordinary annuity? h. What will the FV and the PV for problems a and e be if the interest rate is 10% with semiannual compounding rather than 10% with annual compounding? 1. Find the annual payments for an ordinary annuity and an annuity due for 10 years with a PV of $1,000 and an interest rate of 8%. Find the PV and the FV of an investment that makes the following end-of-year payments. The interest rate is 8%. Suppose you borrow $15,000. The interest rate is 8%, and it requires 4 equal end-of-year payments. Set up an amortization schedule that shows the annual payments, interest payments, principal repayments, and beginning and ending loan balances.

Answer 1

1-	Future value -Using formula	pv*(1+r)^n	1000*(1.1)^5	1610.51
	Future value -Using Excel formula	Using FV function in MS excel =fv(rate,nper,pmt,pv,type) rate =10% nper =5 pmt =0 pv = -1000 type =0	FV(10%,5,0,-1000,0)	$1,610.51
3-	present value -Using formula	pv*(1+r)^n	1000/(1.1)^5	620.9213231
	present value -Using Excel formula	Using PV function in MS excel =Pv(rate,nper,pmt,Fv,type) rate =10% nper =5 pmt =0 Fv = 1000 type =0	PV(10%,5,0,1000,0)	($620.92)
4-	rate of return	(fv/pv)^(1/n)-1	(2000/1000)^(1/5)-1	14.87%

	Future value = Pv*(1+r)^n
2-	Year /rate	0%	5%	20%
	0	1000	1000	1000
	1	1000	1050	1200
	2	1000	1102.5	1440
	3	1000	1157.625	1728
	4	1000	1215.50625	2073.6
	5	1000	1276.281563	2488.32

3000 2500 2488.32 t 2000 2073.6 1728 US SUO- 1500 1440 1200 -Series2 1276.281569-Series3 1 000 - Series4 1 215.50625 1157.625 1000 1000 1102.5 1000 1000 1000 500 0 + Years