Present Value and Future Value

Present Value and Future Value - A s ignm ent #1 Instructor...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: A s ignm ent #1 Instructor A nsw ers 6/15/2010 To get the dialog box, click on fx, then Financial, then FV, then OK. Inputs: PV = 10 0 I/YR = 10% N = 5 Formula: FV = PV(1+I)^N = $1,610.51 Wizard (FV): $1,610.51 Experiment by changing the input values to se how quickly the output values change. Years (D10): Interest Rate (D9) $1,610.51 0% 5% 20% $1,0 0.0 $1,0 0.0 $1,0 0.0 1 $1,0 0.0 $1,050.0 $1,20 .0 2 $1,0 0.0 $1,102.50 $1,4 0.0 3 $1,0 0.0 $1,157.63 $1,728.0 4 $1,0 0.0 $1,215.51 $2,073.60 5 $1,0 0.0 $1,276.28 $2,48 .32 a. Find the FV of $1,0 0 invested to earn 10% an ual y 5 years from now. Answer this question by using a math formula and also by using the Excel function wizard. Note: When you use the wizard and fil in the menu items, the result is the formula you se on the formula line if you click on cel E12. Put the pointer on E12 and then click the function wizard (fx) to se the completed menu. Also, it is general y easiest to fil in the wizard menus by clicking on one of the menu slots to activate the cursor and then clicking on the cel where the item is given. Then, hit the tab key to move down to the next menu slot to continue fil ing out the dialog box. 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 graph with 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 fil in the table by inserting formulas in al the cel s, but a bet er way is to use an Excel data table as described in 07model. We used the data table procedure. Note that the Row Input Cel is D9 and the Column Input Cel is D10, and we set Cel B32 equal to Cel E1 . Then, we selected (highlighted) the range B32:E38, then clicked Data, Table, and fil ed in the menu items to complete the table. To create the graph, first select the range C3 :E38. Then click the chart wizard. Then fol ow the menu. It is easy to make a chart, but a lot of detailed steps are involved to format it so that it's "pret y." Pret y charts are general y not neces ary to get the picture, though. Note that as the last item in the chart menu you are asked if you want to put the chart on the workshe t or on a separate tab. This is a mat er of taste. We put the chart below on the spreadshe t so we could se how changes in the data lead to changes in the graph. Note that the inputs to the data table, hence to the graph, are now in the row and column heads. Change the 20% in Cel E32 to .3 (or 30%), then to .4, then to .5, etc., to se how the table and the chart changes. $1,0 0.0 $1,50 .0 $2,0 0.0 $2,50 .0 $3,0 0.0 G row th of $1,0 0 at V a rious Interest R ates and Time Pe riods Column C Column D Column E Future Va lue of $1,0 0 Growth of $1,0 at Various Interest Rates and Time Periods Inputs: FV = 10 0 I/YR = 10% N = 5 Formula: PV = FV/(1+I)^N = $620.92 Wizard (PV): $620.92 d. A security has a cost of $1,0 0 and wil return $2,0 0 after 5 years. What rate of return does the...
View Full Document

Page1 / 6

Present Value and Future Value - A s ignm ent #1 Instructor...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online