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Unformatted text preview: 0,105 + 14,396 = 154,501 21 21 Annuities on the Spreadsheet Annuities Example Example The present value and future value The formulas in a spreadsheet include a place for annuity payments place Click on the Excel icon to see an Click example example 22 22 Quick Quiz – Part II You know the payment amount for a loan and You you want to know how much was borrowed. Do you compute a present value or a future value? value? You want to receive 5,000 per month in You retirement. If you can earn .75% per month and you expect to need the income for 25 years, how much do you need to have in your account at retirement? account 23 23 Finding the Payment Suppose you want to borrow $20,000 for a new Suppose car. You can borrow at 8% per year, compounded monthly (8/12 = .66667% per month). If you take a 4 year loan, what is your monthly payment? monthly 20,000 = C[1 – 1 / 1.006666748] / .0066667 C = 488.26 24 24 Finding the Payment on a Finding Spreadsheet Spreadsheet Another TVM formula that can be found in a Another spreadsheet is the payment formula spreadsheet PMT(rate,nper,pv,fv) The same sign convention holds as for the PV and The FV formulas FV Click on the Excel icon for an example 25 25 Finding the Number of Payments Finding – Example 6.6 Example Start with the equation and remember your Start logs. logs. 1,000 = 20(1 – 1/1.015t) / .015 .75 = 1 – 1 / 1.015t 1 / 1.015t = .25 1 / .25 = 1.015t t = lln(1/.25) / ln(1.015) = 93.111 months = 7.76 n(1/.25) years years And this is only if you don’t charge anything And more on the card! more 26 26 Finding the Number of Payments Finding – Another Example Another Suppose you borrow $2,000 at 5% and you are Suppose going to make annual payments of $734.42. How long before you pay off the loan? How 2,000 = 734.42(1 – 1/1.05t) / .05 .136161869 = 1 – 1/1.05t 1/1.05t = .863838131 1.157624287 = 1.05t t = ln(1.157624287) / ln(1.05) = 3 years 27 27 Finding the Rate Suppose you borrow $10,000 from your Suppose parents to buy a...
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This document was uploaded on 03/01/2014 for the course FINANCE 250 at Indiana.

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