Question

L M N Before we can use a financial calculator, we must first find the expected real, or inflation-adjusted, rate of return. The real rate is calculated as follows: Real rate= (1 + roV(1 + Inflation) - 1.0 6.00% 2.00% Inflation (1 + Inflation) Real rate Real rate Real rate (1 + r ) 1.06 ? - 1.0 - 1.0 1.02 Step 2: Need to calculate the purchasing power of $100,000 in 10 years, Le., calculate PV. FV Inflation rate N py $100,000 2.00% (582,034 83) Step 3: 3 Calculate the size of the required initial payment 4 BEGIN 5 N 61 7 PV B FV $82,034.83 9 PMT NVALUE! A deposit of $6,598.87 made today and growing by 2% per year will accumulate to $100,000 by Year 10 31 the interest rate is 6% 53 Use Amortization Schedule and Excel's Goal Seek Function Goal Seek Set cet: S$155 Year Interest Beginning Deposit Made Earned Balance at Ber Of Year During Year $0.00 $6,59887 $395.93 6,994.80 6,730 85 $823.54 14.549.19 6,865 46 $1.284.88 22,699.53 7 ,002.77 $1,782.14 31 484 44 7 149 R $2317 4 5-15 Annual Monthly Compound To yale! By changing cel: $0$156 OK Cancel 56 157 158 159 160 Ending Balance $6,994.80 $14,549.19 $22.699.53 $31.484.44 4 4 5-16 EFF | 5-17 Days in a Year Web App 5A 5-14 IRR Web 5-18 Amortization

Answer 1

Real rate	1.06	/	1.02	-1
Real rate	3.92%
Begin
N	10
I	3.92%
PV	0
FV	82034.83
PMT	($6,598.87)

Workings

Book1 - Excel Sign in - 3 Comm Help Share AutoSave of 2 File Home Insert Draw Calibri 11 BIU - - Page Layout Formulas Data - A A = = = pyn - A Review View General - $ -% E 47 0 - Tell me what you want to do 2 PM Conditional Format as Cell Formatting Table Styles Styles 2 insert Delete Format Paste -3 . Sort & Find & Filter - Select - Clipboard Font Alignment Nurnber Cells Editing A18 : * Real rate A 1.02 Real rate 19 Real rate 1.06 =B18/D18-1 23 Begin 10 =B19 26 PV 27 FV 28 PMT 82034.83 =PMT(B25,B24,-B26,827,1)