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Chapter005_Formulas_2nd-1

# Years 27 number of periods example 2 suppose you

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Unformatted text preview: (150,000 – 15,000) = 6,750 Total needed = 15,000 + 6,750 = 21,750 Compute the number of periods Using the formula t = ln(21,750 / 15,000) / ln(1.075) = 5.14 years Per a financial calculator: PV = -15,000, FV = 21,750, I/Y = 7.5, CPT N = 5.14 years PV 29 Quick Quiz – Part IV When might you want to compute the When number of periods? number Suppose you want to buy some new Suppose furniture for your family room. You currently have \$500 and the furniture you want costs \$600. If you can earn 6%, how long will you have to wait if you don’t add any additional money? any 30 Spreadsheet Example Use the following formulas for TVM calculations FV(rate,nper,pmt,pv) PV(rate,nper,pmt,fv) RATE(nper,pmt,pv,fv) NPER(rate,pmt,pv,fv) The formula icon is very useful when you can’t The remember the exact formula remember Click on the Excel icon to open a spreadsheet containing Click four different examples. four 31 Work the Web Example Many financial calculators are available online Click on the web surfer to go to Investopedia’s Click web site and work the following example: web You need \$50,000 in 10 years. If you can earn 6% You interest, how much do you need to invest today? interest, You should get \$27,919.74 32 Table 5.4 33 5 Formulas End of Chapter 34 34 Comprehensive Problem You have \$10,000 to invest for five years. How much additional interest will you earn if How the investment provides a 5% annual return, when compared to a 4.5% annual return? when How long will it take your \$10,000 to double in How value if it earns 5% annually? value What annual rate has been earned if \$1,000 What grows into \$4,000 in 20 years? grows 35...
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