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Ch 02 P 35 Build a Model
Chapter 2.
Ch 02 P 35 Build a Model
Inputs:
PV
=
1000
I
=
10%
N
=
5
Formula:
FV = PV(1+I)^N =
$1,610.51
Wizard (FV):
$1,610.51
Experiment by changing the input values to see how quickly the output values change.
Years (D10):
Interest Rate (D9)
$1,610.51
0%
5%
20%
0
$1,000.00
$1,000.00
$1,000.00
1
$1,000.00
$1,050.00
$1,200.00
2
$1,000.00
$1,102.50
$1,440.00
3
$1,000.00
$1,157.63
$1,728.00
4
$1,000.00
$1,215.51
$2,073.60
5
$1,000.00
$1,276.28
$2,488.32
a.
Find the FV of $1,000 invested to earn 10% after 5 years.
Answer this question by using a
math formula
using the Excel function wizard.
Note:
When you use the wizard and fill in the menu items, the result is the formula you see on the formula line if y
pointer on cell E12.
Put the pointer on E12 and then click the function wizard (fx) to see the completed menu.
Fin
b.
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 gr
years on the horizontal axis and FV on the vertical axis to display your results.
Begin by typing in the row and column labels as shown below. We could fill in the table by inserting formulas in a
a better way is to use an Excel data table as described in 07model.
We used the data table procedure.
Note that the
To create the graph, first select the range C33:E38.
Then click the chart wizard.
Then follow the menu. It is easy t
but a lot of detailed steps are involved to format it so that it's "pretty."
Pretty charts are generally not necessary t
Note that the inputs to the data table, hence to the graph, are now in the row and column heads.
Change the 10% in
(or 20%), then to .3, then to .5, etc., to see how the table and the chart changes.
$2,000.00
$2,500.00
$3,000.00
FV Graph
ue
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View Full Document Inputs:
FV
=
1000
I
=
10%
N
=
5
Formula:
PV = FV/(1+I)^N =
$620.92
Wizard (PV):
$620.92
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?
Inputs:
PV
=
1000
FV
=
2000
I
=
?
N
=
5
Wizard (Rate):
14.87%
Inputs:
PV
=
30
FV
=
60
I
=
growth rate
2%
N
=
?
Wizard (NPER):
35.00
= Years to double.
Inputs:
PMT =
$1,000
N =
5
I
=
15%
PV:
Use function wizard (PV)
PV
=
$3,352.16
c.
Find the PV of $1,000 due in 5 years if the discount rate is 10%.
Again, work the problem with
a formul
using the function wizard.
Note:
In the wizard's menu, use zero for PMTS because there are no periodic payments.
Also, set the FV with a ne
that the PV will appear as a positive number.
Note:
Use zero for Pmt since there are no periodic payments.
Note that the PV is given a
negative sign because i
(cost to buy the security).
Also, note that you must
scroll down the menu to complete the inputs.
e.
Suppose California’s population is 30 million people, and its population is expected to grow by 2%
per y
long would it take for the population to double?
f.
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This note was uploaded on 03/08/2010 for the course FINANCE ADCO 5190 taught by Professor Buildamodel during the Winter '09 term at InterAmerican Recinto Metropolitano.
 Winter '09
 BUILDAMODEL
 Finance

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