Chapter_05 - Ross, Westerfield, and Jordan's Spreadsheet...

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by Brad Jordan and Joe Smolira Version 9.0 Chapter 5 In these spreadsheets, you will learn how to use The following conventions are used in these spr 1) Given data in blue 2) Calculations in red NOTE: Some functions used in these spreadsheets may the "Analysis ToolPak" or "Solver Add-In" be installed in To install these, click on the Office button then "Excel Options," "Add-Ins" and select "Go." Check "Analysis ToolPak" and "Solver Add-In," then click "OK." Ross, Westerfield, and Jordan's Spreadsheet Master Fundamentals of Corporate Finance, 9th edition FV PV Two-way data tables RATE NPER FVSCH EDULE
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e the following Excel functions: readsheets: y require that in Excel.
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Chapter 5 - Section 1 Future Value and Compounding Excel contains numerous financial functions, many of which relate to the time value of mon Example 5.1: Interest on Interest Suppose you have the following investment opportunity for two years: Interest rate per year: 14.0% Initial investment: $325 How much will you have at the end of the investment? How much is simple interest? H At the end of one year, you will have: $370.50 At the end of the investment you will have: $422.37 The total interest earned is: $97.37 Interest on original investment per year: $45.50 Total simple interest: $91.00 Total compound interest: $6.37 Initial investment: $100 Interest rate per year: 10% Year 1 $100.00 $10.00 $- $10.00 2 110.00 10.00 1.00 11.00 3 121.00 10.00 2.10 12.10 4 133.10 10.00 3.31 13.31 5 146.41 10.00 4.64 14.64 Totals $50.00 $11.05 $61.05 As shown in the textbook, the future value of $1 is found by the equation FV = $1 × (1 + r ) t What is the value of the investment each year over the next 5 years? How much of the inte question with the following table: Beginning Amount Simple Interest Compound Interest Total Interest
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Year 1 $110.00 $- 2 $120.00 $1.00 3 $130.00 $3.10 4 $140.00 $6.41 5 $150.00 $11.05 Now we can graph the contribution of compounding to the future value of our investment. To see the effect of compound interest, change the interest rate and see how the compoun RWJ Excel Tip So what does simple interest look like compared to compound interest? We can use Excel simple interest and the total compound interest. Amount with Simple Interest Total Compound Interest To insert this bar chart, we highlighted the columns we wanted in the graph, went to the In get the border shadowing effect, we right-clicked on the graph, selected Format Plot Area In the past, future value tables were very common. Future value tables calculated the futur future value table relatively quickly in Excel. By the way, we will show you a much more ef 1 2 3 $- $20 $40 $60 $80 $100 $120 $140 $160 $180 $1 $3 Future Value, Simple Interest, Time (years) Future Value ($)
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Number of Interest Rate Periods 0% 5% 10% 15% 0 1.000 1.000 1.000 1.000 1 1.000 1.050 1.100 1.150 2 1.000 1.103 1.210 1.323 3 1.000 1.158 1.331 1.521 4 1.000 1.216 1.464 1.749 5 1.000 1.276 1.611 2.011 6 1.000 1.340 1.772 2.313 7 1.000 1.407 1.949
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This note was uploaded on 06/16/2011 for the course FIN 521 taught by Professor Varney during the Spring '11 term at Andrew Jackson.

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Chapter_05 - Ross, Westerfield, and Jordan's Spreadsheet...

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