Question

Suppose you are to receive the following cashflows in the future, at the times indicated belovw (a) Assuming that you deposit all cash flows into a savings account that earns interest at a rate of 3.6% nominal, convertible 12 times per annum, what is the accumulated value of your savings in exactly 21 years time? Hint: Use Excel! Cashflow Time from no Time from no 0.25 0.5 2.5 Cashflow 9,506 2.443 41,377 5,169 w (vearS 8,154 10,450 7,432 49,534 13 13.25 14.5 15 15.5 18 19.5 19.75 75 2.416 55,921 5,665 59,203 4,253 2,400 21,767 6,715 4.25 12.75 (b) Repeat part (a), but with the following interest/ earning rates applying: [i] ґ1) 7.3% [ii] ґо.s)-7.3% [iii] ґ2)-7.3% [iv] d(4)-7.6% (c) What does the interest/earning rate have to be, in order for the accumulated value in 21 years' time to be equal to S1 million? Give your answer in terms of i, the annual effective rate of interest, to 3 significant figures

Answer 1

a)

Time	Cashflow	Time to mature		interest	3.60%
0.25	8154	249	54443972	Annual	43%
0.5	10450	246	62750345	year	21
2.5	7432	222	19097275
3	49534	216	102946259
3.75	4282	207	6473155.4
4	2,416	204	3284634.4
4.25	55921	201	68373178
11	5665	120	394794.02
12.75	59203	99	1963177.2
13	9506	96	283487.77
13.25	2443	93	65521.031
14	41377	84	807194.98
14.5	5169	78	81558.167
15	74865	72	955391.16
15.5	4253	66	43897.445
18	2400	36	8573.5846
9.5	21767	138	2867113.1
19.75	6715	15	11414.118
			324850942	amount