1)

a)
PV
i
N
FV

50000
6% APR
7 years
??
$75,181.51

b)
PV
i
N
m
FV

50000
6% APR
7 years
52

periodic rate
number of periods

??
$76,079.66

c)
PV
i
N
m
FV

50000
6% APR
7 years
cont
??
$ 76,098.08

2)
PV
i
N
FV

20,000.00
7.50% APR
4 Years
??
$26,709.38

b)
PV
i
N
m
FV

20,000.00
7.50% APR
4 Years
365
??
$26,996.34

periodic rate
number of periods

1) You decided to invest $50,00

pays 6%,

a. How much will you have in yo

b. How much will you have in y

interest is compounded weekly?

c. How much will you have in yo

interest is compounded continu
0.001153846 per week
364 weeks

$76,079.66

2)
a. You are thinking of borrow
rate of 7.5% to buy a new c
to repay in 4 years?

b. How much would you hav

interest is compounded daily

0.000205479 per day

1,460.00 days

$26,996.34

cided to invest $50,000 today in an account that

uch will you have in your account in 7 years?

uch will you have in your account in 7 years if

compounded weekly?

uch will you have in your account in 7 years if

compounded continuously?

are thinking of borrowing $20,000 at an interest

7.5% to buy a new car. How much would you have
ay in 4 years?

much would you have to repay in 4 years if

t is compounded daily?

Pv

100

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30

0%
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00

6%
$100.00
$106.00
$112.36
$119.10
$126.25
$133.82
$141.85
$150.36
$159.38
$168.95
$179.08
$189.83
$201.22
$213.29
$226.09
$239.66
$254.04
$269.28
$285.43
$302.56
$320.71
$339.96
$360.35
$381.97
$404.89
$429.19
$454.94
$482.23
$511.17
$541.84
$574.35

12%
$100.00
$112.00
$125.44
$140.49
$157.35
$176.23
$197.38
$221.07
$247.60
$277.31
$310.58
$347.85
$389.60
$436.35
$488.71
$547.36
$613.04
$686.60
$769.00
$861.28
$964.63
$1,080.38
$1,210.03
$1,355.23
$1,517.86
$1,700.01
$1,904.01
$2,132.49
$2,388.39
$2,674.99
$2,995.99

a. What is the future value of $1

0%, 6%, 12%

b. Create a chart showing the re

and time using information give

F
$4,000.00
$3,000.00
$2,000.00
$1,000.00
$0.00
0

10

15
Years

t is the future value of $100 in 30 years if interest rate is:

, 12%

te a chart showing the relationship between FV, interest rate

e using information given in part (a)

FV

0%
6%
12%

10

15
Years

20

25

30

35

1)
FV
N
i
PV

67,000.00
10
9%
??
$28,301.52

b)
FV
N
i
m
PV

67,000.00
10
9%
4
??

$27,513.27

c)
FV
N
i
m
PV

67,000.00
10
9%
cont
??
27,240.17

2)
PV
i
FV
N

??
5.50%
80,000.00
6.00

$58,019.67

b)
PV
i
FV
N
m

??
5.50%
80,000.00
6
12
$57,557.28

c)
PV
i
FV
N
m

??
5.50%
80,000.00
6
cont
$

3)
FV
N
i
PV

57,513.90

100,000.00
20
7%
??
$25,841.90

1)
a. What is the maximum you would pa
pay you back $67,000 in 10 year if you

b. How much would you pay for the inv

opportunity cost is 9% compounded qu

c. How much would you pay for the inve

opportunity cost is 9% compounded con

2)
a. How much can you borrow today at 5
repay $80,000 in 6 years?
b. How much can you borrow if the 5.5%
c. How much can you borrow if the 5.5%

3)
20 years ago your parents opene
name earning 7% APR. The accou
today. How much was your paren

maximum you would pay for an investment that will

$67,000 in 10 year if your opportunity cost is 9%?

would you pay for the investment in part (a) if your

st is 9% compounded quarterly?

ould you pay for the investment in part (a) if your

st is 9% compounded continuously?

n you borrow today at 5.5% rate if you can afford to

6 years?

n you borrow if the 5.5% is compounded monthly?

n you borrow if the 5.5% is compounded continuously?

ago your parents opened a saving account in your

rning 7% APR. The account has a balance of$100,000
ow much was your parents initial deposit?

FV

100

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30

0%
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00

6%
$100.00
$94.34
$89.00
$83.96
$79.21
$74.73
$70.50
$66.51
$62.74
$59.19
$55.84
$52.68
$49.70
$46.88
$44.23
$41.73
$39.36
$37.14
$35.03
$33.05
$31.18
$29.42
$27.75
$26.18
$24.70
$23.30
$21.98
$20.74
$19.56
$18.46
$17.41

12%
$100.00
$89.29
$79.72
$71.18
$63.55
$56.74
$50.66
$45.23
$40.39
$36.06
$32.20
$28.75
$25.67
$22.92
$20.46
$18.27
$16.31
$14.56
$13.00
$11.61
$10.37
$9.26
$8.26
$7.38
$6.59
$5.88
$5.25
$4.69
$4.19
$3.74
$3.34

$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
0

10

1)
a. What is the Present value of $100 to be rec
interest rate is:
0%, 6%, 12%

b. Create a chart showing the relationship bet

and time using information given in part (a)

0.00

0.00

0.00
0%

0.00

6%
12%

0.00

0.00

0.00
0

10

15

20

25

30

35

t value of $100 to be received in 30 years if

wing the relationship between PV, interest rate

mation given in part (a)

a)
PV

b)
FV
N
i
PV

c)
FV
N
i
PV

207,000

261,920.00
6
4%
$206,999

358,457.00
14
4%
$207,000

Alternative
a)
PV
N
i

207000
14
4%

FV(14)

$358,457

b)
PV
N
i

261920
8
4%

FV(14)

c)
FV(14)

$358,456

358,457

Assuming an opportunity cost of 4%, which would you rather have?

(round to the nearest dollar)
a) $207,000 today
b) $261,920 in 6 years
c) $358,457 in 14 years
How about if your opportunity cost is 4% with monthly
compounding?

uld you rather have?

monthly

1)
FV
N
PV
i

120,000.00
15 years
50,000.00
??

6.01%

b)
FV
N
PV
m
i

120,000.00
15 years
50,000.00
365
??
0.0160% per day
5.84% APR

2)
PV
FV
N
i

1
2
16
??
4.43% APR

b)
PV
FV
N
m
i

1
2
16
12
??

APR
0.36% per month
4.34% APR

3)
PV
FV
N

20,000.00
30,000.00
5

??

APR
8.45%

b)
PV
FV
N
m
i

20,000.00
30,000.00
5
365
??

APR
0.02% per day
8.11% APR

1)
a. You are considering the purchase of an investm
will pay you $120,000 in 15 years. This investmen
you $50,000 today. What rate of return is this inve
promising you?
b. Rework part (a) if this investment is promising
return that is daily compounded.

2)
a. At what rate of return would you be able to do
money in 16 years?

b. At what rate would you be able to double your

16 years if it is compounded monthly?

3)
a. Your bank agreed to loan you $20,000 today in
return for a repayment of $30,000 in 5 years?
What interest rate is your bank charging you?

b. Your bank agreed to loan you $20,000 today i

return for a repayment of $30,000 in 5 years.
What interest rate is your bank charging you if it
compounded daily?

What interest rate is your bank charging you?

b. Your bank agreed to loan you $20,000 today i

return for a repayment of $30,000 in 5 years.
What interest rate is your bank charging you if it
compounded daily?

e purchase of an investment that

15 years. This investment will cost
rate of return is this investment

investment is promising you a

unded.

n would you be able to double your

ou be able to double your money in

nded monthly?

oan you $20,000 today in

of $30,000 in 5 years?
ur bank charging you?

oan you $20,000 today in

of $30,000 in 5 years.
ur bank charging you if it is

ur bank charging you?

oan you $20,000 today in

of $30,000 in 5 years.
ur bank charging you if it is

1)
a
FV
PV
i
N

1,000,000.00
200,000.00
12%
??

years
14.20 years

b)
FV
PV
i
m
N

1,000,000.00
200,000.00
12%
2
??

years
27.62 semiannual periods
13.81 years

1)
a. How long would it take for you t
you invest $200,000 today at 12%?

b. How long would it take for you t

you invest $200,000 today at 12%
semiannually?

ng would it take for you to be a millionaire if

$200,000 today at 12%?

ng would it take for you to be a millionaire if

$200,000 today at 12% compounded
ally?

1)
FV
N
PMT
i

??
8
1,000.00
5%

FVA

b)
FV
N
PMT
i
Type

$9,549.11

??

Using FVA to calculate FVAD

10,026.56

8
1,000.00
5%
due
$10,026.56

2)
i
PV
N
FV

5%
$9,549.11
6
??
$12,796.72

3)
PV
PMT
N
i
FV

3,000.00
1,000.00
8
5%
??
($13,981.48)

4)
N
m
PMT
i
FV

3
12
200
4% APR

$13,981.48

Number of periods
periodic rate

36
0.00333333

??
$7,636.31

$7,636.31

b)
N
m
PMT
i
Type

3
12
200
4% APR

Number of periods
periodic rate

36
0.00333333

due
$7,661.77

Using FVA to find FVAD

$ 7,661.77

1)
a. How much will you have in your sa
if you make annual deposits of $1000
5%?

culate FVAD

b. How much will you have in your sa

if you make annual deposits of $1000,
account earns 5% interest?

2) Assuming an interest rate of 5%, ho

saving account in 14 years if you mak
$1000 for 8 years and make no furthe
that?

3) You currently have $3000 in your sa

you have in your saving account at the
annual deposits of $1000 and your sav

months
per month

4)
a. How much will you have in your sav
if you make monthly deposits of $200
account?

b. How much will you have in your sav

if you make monthly deposits of $200,
4% on your saving account?

months
per month

will you have in your saving account at the end of 8 years

nnual deposits of $1000 and your saving account earns

will you have in your saving account at the end of 8 years

nnual deposits of $1000, starting today and your saving
s 5% interest?

an interest rate of 5%, how much will you have in your

nt in 14 years if you make annual end of year deposits of
ears and make no further deposits or withdrawals after

tly have $3000 in your saving account. How much will

our saving account at the end of 8 years if you make
ts of $1000 and your saving account earns 5% interest?

will you have in your saving account at the end of 3 years

monthly deposits of $200 and earn 4% on your saving

will you have in your saving account at the end of 3 years

monthly deposits of $200, starting today, if you can earn
aving account?

1)
i
PV
N
PMT

9%
??
5
100
$388.97

2)
PV
PMT
N
i
Type

??

Using PVA to find PVAD

423.97

100
5
9%
due
$423.97

3)
i
PV
N
PMT
FV

9%
??
5
100
150
($486.45)

$486.45

1)
At an interest rate of 9%, what is the m
today if you want to payoff your loan in

2)
How much do you have to invest today
$100 each year for 5 years starting toda
9% on your investment?

3)
At an interest rate of 9%, what is the m
today, if you want to payoff your loan in
addition to a lump sum of $150 at the e
payment)?

rate of 9%, what is the maximum you can borrow

nt to payoff your loan in 5 equal payments of $100?

ou have to invest today to be able to withdraw

for 5 years starting today, assuming you can earn
estment?

ate of 9%, what is the maximum you can borrow

ant to payoff your loan in 5 equal payments of $100 in
mp sum of $150 at the end of 5 years (balloon

1)
PV
2)
i
PMT
N

50,000.00

FV in year 6
$79,343.72

Values in year 6
1)
PV
N
i

8%
11000
6

Value in year 6
PV

3)
FV
N
i

50,851.68

$80,695.22
2)
PMT
N
i

100,000.00
10
8%

Value in year 6
PV

4)
PMT
N
FV
i
PV

46,319.35

$73,502.99
3)
FV
N
i

11,000.00
4
20,000.00
8%
51,133.99

Value in year 6
$81,143.22
4)
two steps
Step 1 find value in year 4
PMT
N
i
FV
Value in year 4
Step 2
find FV of step 1 in year 6
Value in year 6
N
i

2)
PMT
i
N
PV

40,000.00
6%
10
??
$294,403.48

alues in year 6

1)
If your opportunity cost is 8
cash inflows would you pre

50000
6
8%

alue in year 6

$79,343.72

1.
2.
3.
4.

$50,000 today
$ 11,000 each year for
$100,000 in 10 years
$11,000 each year for 4

11000
6
8%

alue in year 6

$80,695.22

100,000.00
4
8%

alue in year 6

$73,502.99

tep 1 find value in year 4

11000
4
8%
20000

alue in year 4

$69,567.23

nd FV of step 1 in year 6

alue in year 6
2
8%
$81,143.22

2)
You won a $400,000 competition.
will pay it over 10 years annual pa
is 6%, how much is your prize wor

2)
You won a $400,000 competition.
will pay it over 10 years annual pa
is 6%, how much is your prize wor

1)
If your opportunity cost is 8%, which one of the following alternative
cash inflows would you prefer?

1.
2.
3.
4.

$50,000 today
$ 11,000 each year for 6 years
$100,000 in 10 years
$11,000 each year for 4 years and $20,000 at the end of 4 years

n a $400,000 competition. The organizer of the completion

y it over 10 years annual payments. If your opportunity cost
how much is your prize worth?

n a $400,000 competition. The organizer of the completion

y it over 10 years annual payments. If your opportunity cost
how much is your prize worth?

1)
PV
N
i
PMT

28,000.00
8
3.40%

o/s balance after you make the 3rd payme

Number of remaining payments
PV of the remaining payments

??
$4,056.36

b)
PV
N
i
PMT
Type

28,000.00
8
3.40%
??
due
$3,922.98

c)
PV
N
i
PMT
m

2)
PV
i
N
FV
PMT

28,000.00
8
3.40%
??
12

30,000.00
6%
20
1,000,000.00
??
$24,569.02

number of payments
monthly rate

after you make the 3rd payment

emaining payments
5
maining payments
$18,366.68

1)
a. You owe $28,000 i
to pay it off over the
equal payments. Wha
payment if the rate o

b. rework part (a) ass

payments at the begi

c. rework part (a) ass

monthly payments fo

96 monthly
0.002833

$333.54

2)
You want to start sa
You already have $3
that earns 6%. How
this account each ye
order to retiree a mi

1)
a. You owe $28,000 is student loans and want
to pay it off over the next 8 years in annual
equal payments. What is the size of each
payment if the rate on student loans is 3.4%

b. rework part (a) assuming you will make your

payments at the beginning of each year.

c. rework part (a) assuming you will make

monthly payments for 8 years.

2)
You want to start saving for your retirement.
You already have $30,000 saved in an account
that earns 6%. How much should you add to
this account each year for the next 20 years in
order to retiree a millionaire?

1)
FV
m
N*m
PMT
I

??

15000
12
36 monthly deposits
400
APR
0.232% monthly rate
2.78% APR

2)
PV
PMT
N
i

9,000.00
2,000.00
11
??

APR
18.92%

3)
i
PV
PMT
m
N

??

APR
9000
200
12
7

Number of payments

1.67% monthly rate

20.03% APR

84

1)
You want to save $15,000 for a
house. You will make 36 monthl
saving account. What rate must
account to accomplish your goa

2)
Calculate the rate of return on
cost you $9,000 today and re
for the next 11 years.

monthly

3)
Find the rate of return on an in
you $9,000 today and return $
years.

nt to save $15,000 for a down payment on a

You will make 36 monthly deposits of $400 in a
account. What rate must you earn on this saving
t to accomplish your goal?

late the rate of return on an investment that will

ou $9,000 today and return $2,000 each year
e next 11 years.

he rate of return on an investment that will cost

9,000 today and return $200 each month for 7
.

1)
N
PMT
PV
i

??
1,000.00
5,000.00
6%
6.12

b)
N
PMT
PV
i
Type

??
1,000.00
5,000.00
6%
due
5.71

2)
PV
m
PMT
i
N*m

4500
12
210
18% APR

monthly rate

0.015

??
26.04444 monthly payments

b)
N

??

years

2.1703698 years

1)
a. How many annual paym
make in order to pay off a

b. How many annual paym

make to payoff a loan of $5
first payment today?

2)
a. How many payments do you hav
pay off your credit card debt of $4,
monthly payments of $210 and the
18%?

b. Referring to part (a) How many y

pay your credit card off ?

How many annual payments of $1000 do you have to

ake in order to pay off a loan of $5,000 at 6%?

How many annual payments of $1000 do you have to

ake to payoff a loan of $5,000 at 6% if you make your
st payment today?

ny payments do you have to make in order to

ur credit card debt of $4,500 if you make
ayments of $210 and the bank is charging you

g to part (a) How many years will it take you to

redit card off ?

1)
delayed

20

step 1 - Find PVA in year delayed -1

PMT
100,000.00
N
30
i
4%
PVA(19)

$1,729,203.33

Step 2 - Find PV of the lump sum found in step 1

FV(19)
$1,729,203.33
N
19
i
4%
PV(0)
??
$820,753.26
b)
FV(19)
N
i
PMT

$1,729,203.33
19
4%
??
$62,491.02

c)
o/s balance is PV of remaining payments
remaining payments
2
PV
$188,609.47

Alternative
PV(0)
$820,753.26
N
19
i
4%
PMT
??
$62,491.02

you want to retire in 20 years and your go

of $100,000 for 30 years starting the day
4% on your retirement account for the ne

a. How much do you have to deposit toda

b. How much do you have to pay each ye

in order to achieve your retirement goal i
year before you retire?

c. How much will you have in your retirem

make your 28th withdrawal ?

d. How much will you have in your retirem

30th and last withdrawal?

e in 20 years and your goal is to make annual withdrawals

30 years starting the day you retire. Assuming you can earn
ement account for the next 50 years.

you have to deposit today to achieve your retirement goal.

you have to pay each year (rather than a lump sum to day)
ve your retirement goal if the last deposit will be made a
retire?

you have in your retirement account immediately after you

withdrawal ?

you have in your retirement account after you make the

hdrawal?

PV
i
N

60,000.00
2.35% APR
11

a) PMT

$6,253.38

period
1
2
3
4
5
6
7
8
9
10
11

Beginning balance
PMT
60,000.00
55,156.62
50,199.42
45,125.73
39,932.81
34,617.85
29,177.99
23,610.30
17,911.76
12,079.31
6,109.80

$6,253.38
$6,253.38
$6,253.38
$6,253.38
$6,253.38
$6,253.38
$6,253.38
$6,253.38
$6,253.38
$6,253.38
$6,253.38

Interest portion
1,410.00
1,296.18
1,179.69
1,060.45
938.42
813.52
685.68
554.84
420.93
283.86
143.58

You owe $60,000 in 2.35% student loans. Yo

amortize the loan over 11 annual payments

Principle portion
Ending balance
$4,843.38
55,156.62
$4,957.20
50,199.42
$5,073.69
45,125.73
$5,192.92
39,932.81
$5,314.96
34,617.85
$5,439.86
29,177.99
$5,567.70
23,610.30
$5,698.54
17,911.76
$5,832.45
12,079.31
$5,969.51
6,109.80
$6,109.80
-

a. How large should your annual payments

b. What is the interest portion of the 4th pa
c. What is the principle portion of the 3rd pa
d. What would your lean balance be immed
make your 6th payment?
c. Prepare the amortization schedule for thi

b
Interest
IPMT
c
principle
PPMT

4
1,060.45

3
$5,073.69

d
o/s balance after
number of remaining PMTs
PV of remaining payments

35% student loans. You decided to

11 annual payments.

ur annual payments be?

portion of the 4th payment?
portion of the 3rd payment?
an balance be immediately after you
nt?
ation schedule for this loan.

maining PMTs
ng payments

6
5
29,177.99

price
D.P.
rate
Years

160,000.00
15%
6% APR
30

Number of payments
Monthly rate
PV (loan)

360
0.005
136,000.00

Monthly payment

period

$815.39

Beginning balance
PMT
1
136,000.00
2
135,864.61
3
135,728.55
4
135,591.80
5
135,454.37
6
135,316.25
7
135,177.45
8
135,037.94
9
134,897.75
10
134,756.85
11
134,615.24
12
134,472.93
13
134,329.90
14
134,186.16
15
134,041.71
16
133,896.53
17
133,750.62
18
133,603.99
19
133,456.62
20
133,308.51
21
133,159.66
22
133,010.07
23
132,859.74
24
132,708.65
25
132,556.80
26
132,404.20
27
132,250.83
28
132,096.69
29
131,941.79
30
131,786.11
31
131,629.65
32
131,472.41
33
131,314.38

$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39

34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81

131,155.57
130,995.96
130,835.55
130,674.34
130,512.32
130,349.49
130,185.85
130,021.39
129,856.11
129,690.00
129,523.06
129,355.29
129,186.68
129,017.22
128,846.92
128,675.76
128,503.75
128,330.88
128,157.15
127,982.55
127,807.07
127,630.72
127,453.48
127,275.36
127,096.35
126,916.44
126,735.64
126,553.93
126,371.31
126,187.77
126,003.32
125,817.95
125,631.65
125,444.42
125,256.26
125,067.15
124,877.10
124,686.09
124,494.13
124,301.22
124,107.33
123,912.48
123,716.66
123,519.85
123,322.06
123,123.28
122,923.51
122,722.74

$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39

82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129

122,520.96
122,318.18
122,114.38
121,909.56
121,703.72
121,496.85
121,288.95
121,080.01
120,870.02
120,658.98
120,446.88
120,233.73
120,019.51
119,804.22
119,587.85
119,370.40
119,151.86
118,932.24
118,711.51
118,489.68
118,266.74
118,042.68
117,817.51
117,591.21
117,363.77
117,135.20
116,905.49
116,674.63
116,442.61
116,209.44
115,975.10
115,739.58
115,502.89
115,265.02
115,025.95
114,785.69
114,544.23
114,301.57
114,057.69
113,812.59
113,566.26
113,318.70
113,069.91
112,819.87
112,568.58
112,316.03
112,062.22
111,807.15

$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39

130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177

111,550.79
111,293.16
111,034.24
110,774.02
110,512.50
110,249.67
109,985.53
109,720.07
109,453.28
109,185.16
108,915.70
108,644.89
108,372.72
108,099.20
107,824.31
107,548.04
107,270.39
106,991.35
106,710.92
106,429.09
106,145.85
105,861.19
105,575.10
105,287.59
104,998.64
104,708.24
104,416.40
104,123.09
103,828.32
103,532.07
103,234.34
102,935.12
102,634.41
102,332.19
102,028.47
101,723.22
101,416.45
101,108.14
100,798.29
100,486.89
100,173.94
99,859.42
99,543.33
99,225.66
98,906.40
98,585.54
98,263.08
97,939.01

$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39

178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225

97,613.31
97,285.99
96,957.03
96,626.43
96,294.17
95,960.25
95,624.67
95,287.40
94,948.45
94,607.80
94,265.45
93,921.39
93,575.61
93,228.10
92,878.85
92,527.86
92,175.11
91,820.59
91,464.31
91,106.24
90,746.38
90,384.73
90,021.26
89,655.98
89,288.87
88,919.93
88,549.14
88,176.49
87,801.99
87,425.61
87,047.35
86,667.20
86,285.14
85,901.18
85,515.30
85,127.49
84,737.73
84,346.03
83,952.38
83,556.75
83,159.14
82,759.55
82,357.96
81,954.36
81,548.74
81,141.10
80,731.42
80,319.68

$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39

226
227
228
229
230
231
232
233
234
235
236
237
238
239
240
241
242
243
244
245
246
247
248
249
250
251
252
253
254
255
256
257
258
259
260
261
262
263
264
265
266
267
268
269
270
271
272
273

79,905.89
79,490.03
79,072.10
78,652.07
78,229.94
77,805.70
77,379.34
76,950.85
76,520.21
76,087.43
75,652.47
75,215.35
74,776.04
74,334.53
73,890.81
73,444.88
72,996.71
72,546.31
72,093.65
71,638.73
71,181.54
70,722.05
70,260.28
69,796.19
69,329.78
68,861.04
68,389.96
67,916.52
67,440.71
66,962.53
66,481.95
65,998.97
65,513.58
65,025.76
64,535.50
64,042.79
63,547.61
63,049.96
62,549.82
62,047.18
61,542.03
61,034.35
60,524.13
60,011.37
59,496.03
58,978.13
58,457.63
57,934.53

$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39

274
275
276
277
278
279
280
281
282
283
284
285
286
287
288
289
290
291
292
293
294
295
296
297
298
299
300
301
302
303
304
305
306
307
308
309
310
311
312
313
314
315
316
317
318
319
320
321

57,408.81
56,880.47
56,349.48
55,815.84
55,279.53
54,740.54
54,198.85
53,654.46
53,107.34
52,557.49
52,004.89
51,449.52
50,891.38
50,330.45
49,766.71
49,200.16
48,630.77
48,058.54
47,483.44
46,905.47
46,324.61
45,740.84
45,154.16
44,564.54
43,971.97
43,376.44
42,777.94
42,176.44
41,571.93
40,964.40
40,353.84
39,740.22
39,123.53
38,503.76
37,880.89
37,254.90
36,625.79
35,993.53
35,358.11
34,719.51
34,077.72
33,432.72
32,784.49
32,133.03
31,478.30
30,820.31
30,159.02
29,494.43

$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39

322
323
324
325
326
327
328
329
330
331
332
333
334
335
336
337
338
339
340
341
342
343
344
345
346
347
348
349
350
351
352
353
354
355
356
357
358
359
360

28,826.51
28,155.25
27,480.64
26,802.66
26,121.28
25,436.50
24,748.29
24,056.64
23,361.54
22,662.96
21,960.88
21,255.30
20,546.19
19,833.53
19,117.31
18,397.51
17,674.11
16,947.09
16,216.43
15,482.13
14,744.15
14,002.48
13,257.10
12,508.00
11,755.15
10,998.54
10,238.14
9,473.95
8,705.93
7,934.07
7,158.35
6,378.75
5,595.26
4,807.85
4,016.50
3,221.19
2,421.91
1,618.63
811.33

$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39
$815.39

You are buying a house that costs $160,0

balance for 30 years at 6% with monthly

a) Calculate your monthly mortgage paym

b) Prepare the amortization schedule
c) Use excel function to calculate the prin
d) Use excel function to calculate the inte
e) Calculate your outstanding balance aft

Interest portion
680.00
679.32
678.64
677.96
677.27
676.58
675.89
675.19
674.49
673.78
673.08
672.36
671.65
670.93
670.21
669.48
668.75
668.02
667.28
666.54
665.80
665.05
664.30
663.54
662.78
662.02
661.25
660.48
659.71
658.93
658.15
657.36
656.57

Principle portion
Ending balance
$135.39
135,864.61
$136.07
135,728.55
$136.75
135,591.80
$137.43
135,454.37
$138.12
135,316.25
$138.81
135,177.45
$139.50
135,037.94
$140.20
134,897.75
$140.90
134,756.85
$141.60
134,615.24
$142.31
134,472.93
$143.02
134,329.90
$143.74
134,186.16
$144.46
134,041.71
$145.18
133,896.53
$145.91
133,750.62
$146.64
133,603.99
$147.37
133,456.62
$148.11
133,308.51
$148.85
133,159.66
$149.59
133,010.07
$150.34
132,859.74
$151.09
132,708.65
$151.85
132,556.80
$152.60
132,404.20
$153.37
132,250.83
$154.13
132,096.69
$154.91
131,941.79
$155.68
131,786.11
$156.46
131,629.65
$157.24
131,472.41
$158.03
131,314.38
$158.82
131,155.57

655.78
654.98
654.18
653.37
652.56
651.75
650.93
650.11
649.28
648.45
647.62
646.78
645.93
645.09
644.23
643.38
642.52
641.65
640.79
639.91
639.04
638.15
637.27
636.38
635.48
634.58
633.68
632.77
631.86
630.94
630.02
629.09
628.16
627.22
626.28
625.34
624.39
623.43
622.47
621.51
620.54
619.56
618.58
617.60
616.61
615.62
614.62
613.61

$159.61
$160.41
$161.21
$162.02
$162.83
$163.64
$164.46
$165.28
$166.11
$166.94
$167.77
$168.61
$169.46
$170.30
$171.15
$172.01
$172.87
$173.73
$174.60
$175.48
$176.35
$177.24
$178.12
$179.01
$179.91
$180.81
$181.71
$182.62
$183.53
$184.45
$185.37
$186.30
$187.23
$188.17
$189.11
$190.05
$191.00
$191.96
$192.92
$193.88
$194.85
$195.83
$196.81
$197.79
$198.78
$199.77
$200.77
$201.78

130,995.96
130,835.55
130,674.34
130,512.32
130,349.49
130,185.85
130,021.39
129,856.11
129,690.00
129,523.06
129,355.29
129,186.68
129,017.22
128,846.92
128,675.76
128,503.75
128,330.88
128,157.15
127,982.55
127,807.07
127,630.72
127,453.48
127,275.36
127,096.35
126,916.44
126,735.64
126,553.93
126,371.31
126,187.77
126,003.32
125,817.95
125,631.65
125,444.42
125,256.26
125,067.15
124,877.10
124,686.09
124,494.13
124,301.22
124,107.33
123,912.48
123,716.66
123,519.85
123,322.06
123,123.28
122,923.51
122,722.74
122,520.96

612.60
611.59
610.57
609.55
608.52
607.48
606.44
605.40
604.35
603.29
602.23
601.17
600.10
599.02
597.94
596.85
595.76
594.66
593.56
592.45
591.33
590.21
589.09
587.96
586.82
585.68
584.53
583.37
582.21
581.05
579.88
578.70
577.51
576.33
575.13
573.93
572.72
571.51
570.29
569.06
567.83
566.59
565.35
564.10
562.84
561.58
560.31
559.04

$202.78
$203.80
$204.82
$205.84
$206.87
$207.90
$208.94
$209.99
$211.04
$212.09
$213.15
$214.22
$215.29
$216.37
$217.45
$218.54
$219.63
$220.73
$221.83
$222.94
$224.06
$225.18
$226.30
$227.43
$228.57
$229.71
$230.86
$232.02
$233.18
$234.34
$235.51
$236.69
$237.87
$239.06
$240.26
$241.46
$242.67
$243.88
$245.10
$246.33
$247.56
$248.80
$250.04
$251.29
$252.55
$253.81
$255.08
$256.35

122,318.18
122,114.38
121,909.56
121,703.72
121,496.85
121,288.95
121,080.01
120,870.02
120,658.98
120,446.88
120,233.73
120,019.51
119,804.22
119,587.85
119,370.40
119,151.86
118,932.24
118,711.51
118,489.68
118,266.74
118,042.68
117,817.51
117,591.21
117,363.77
117,135.20
116,905.49
116,674.63
116,442.61
116,209.44
115,975.10
115,739.58
115,502.89
115,265.02
115,025.95
114,785.69
114,544.23
114,301.57
114,057.69
113,812.59
113,566.26
113,318.70
113,069.91
112,819.87
112,568.58
112,316.03
112,062.22
111,807.15
111,550.79

557.75
556.47
555.17
553.87
552.56
551.25
549.93
548.60
547.27
545.93
544.58
543.22
541.86
540.50
539.12
537.74
536.35
534.96
533.55
532.15
530.73
529.31
527.88
526.44
524.99
523.54
522.08
520.62
519.14
517.66
516.17
514.68
513.17
511.66
510.14
508.62
507.08
505.54
503.99
502.43
500.87
499.30
497.72
496.13
494.53
492.93
491.32
489.70

$257.63
$258.92
$260.22
$261.52
$262.83
$264.14
$265.46
$266.79
$268.12
$269.46
$270.81
$272.16
$273.53
$274.89
$276.27
$277.65
$279.04
$280.43
$281.83
$283.24
$284.66
$286.08
$287.51
$288.95
$290.40
$291.85
$293.31
$294.77
$296.25
$297.73
$299.22
$300.71
$302.22
$303.73
$305.25
$306.77
$308.31
$309.85
$311.40
$312.95
$314.52
$316.09
$317.67
$319.26
$320.86
$322.46
$324.07
$325.69

111,293.16
111,034.24
110,774.02
110,512.50
110,249.67
109,985.53
109,720.07
109,453.28
109,185.16
108,915.70
108,644.89
108,372.72
108,099.20
107,824.31
107,548.04
107,270.39
106,991.35
106,710.92
106,429.09
106,145.85
105,861.19
105,575.10
105,287.59
104,998.64
104,708.24
104,416.40
104,123.09
103,828.32
103,532.07
103,234.34
102,935.12
102,634.41
102,332.19
102,028.47
101,723.22
101,416.45
101,108.14
100,798.29
100,486.89
100,173.94
99,859.42
99,543.33
99,225.66
98,906.40
98,585.54
98,263.08
97,939.01
97,613.31

488.07
486.43
484.79
483.13
481.47
479.80
478.12
476.44
474.74
473.04
471.33
469.61
467.88
466.14
464.39
462.64
460.88
459.10
457.32
455.53
453.73
451.92
450.11
448.28
446.44
444.60
442.75
440.88
439.01
437.13
435.24
433.34
431.43
429.51
427.58
425.64
423.69
421.73
419.76
417.78
415.80
413.80
411.79
409.77
407.74
405.71
403.66
401.60

$327.32
$328.96
$330.60
$332.26
$333.92
$335.59
$337.27
$338.95
$340.65
$342.35
$344.06
$345.78
$347.51
$349.25
$350.99
$352.75
$354.51
$356.29
$358.07
$359.86
$361.66
$363.47
$365.28
$367.11
$368.94
$370.79
$372.64
$374.51
$376.38
$378.26
$380.15
$382.05
$383.96
$385.88
$387.81
$389.75
$391.70
$393.66
$395.63
$397.60
$399.59
$401.59
$403.60
$405.62
$407.64
$409.68
$411.73
$413.79

97,285.99
96,957.03
96,626.43
96,294.17
95,960.25
95,624.67
95,287.40
94,948.45
94,607.80
94,265.45
93,921.39
93,575.61
93,228.10
92,878.85
92,527.86
92,175.11
91,820.59
91,464.31
91,106.24
90,746.38
90,384.73
90,021.26
89,655.98
89,288.87
88,919.93
88,549.14
88,176.49
87,801.99
87,425.61
87,047.35
86,667.20
86,285.14
85,901.18
85,515.30
85,127.49
84,737.73
84,346.03
83,952.38
83,556.75
83,159.14
82,759.55
82,357.96
81,954.36
81,548.74
81,141.10
80,731.42
80,319.68
79,905.89

399.53
397.45
395.36
393.26
391.15
389.03
386.90
384.75
382.60
380.44
378.26
376.08
373.88
371.67
369.45
367.22
364.98
362.73
360.47
358.19
355.91
353.61
351.30
348.98
346.65
344.31
341.95
339.58
337.20
334.81
332.41
329.99
327.57
325.13
322.68
320.21
317.74
315.25
312.75
310.24
307.71
305.17
302.62
300.06
297.48
294.89
292.29
289.67

$415.86
$417.94
$420.03
$422.13
$424.24
$426.36
$428.49
$430.63
$432.79
$434.95
$437.13
$439.31
$441.51
$443.72
$445.93
$448.16
$450.41
$452.66
$454.92
$457.20
$459.48
$461.78
$464.09
$466.41
$468.74
$471.08
$473.44
$475.81
$478.19
$480.58
$482.98
$485.39
$487.82
$490.26
$492.71
$495.17
$497.65
$500.14
$502.64
$505.15
$507.68
$510.22
$512.77
$515.33
$517.91
$520.50
$523.10
$525.72

79,490.03
79,072.10
78,652.07
78,229.94
77,805.70
77,379.34
76,950.85
76,520.21
76,087.43
75,652.47
75,215.35
74,776.04
74,334.53
73,890.81
73,444.88
72,996.71
72,546.31
72,093.65
71,638.73
71,181.54
70,722.05
70,260.28
69,796.19
69,329.78
68,861.04
68,389.96
67,916.52
67,440.71
66,962.53
66,481.95
65,998.97
65,513.58
65,025.76
64,535.50
64,042.79
63,547.61
63,049.96
62,549.82
62,047.18
61,542.03
61,034.35
60,524.13
60,011.37
59,496.03
58,978.13
58,457.63
57,934.53
57,408.81

287.04
284.40
281.75
279.08
276.40
273.70
270.99
268.27
265.54
262.79
260.02
257.25
254.46
251.65
248.83
246.00
243.15
240.29
237.42
234.53
231.62
228.70
225.77
222.82
219.86
216.88
213.89
210.88
207.86
204.82
201.77
198.70
195.62
192.52
189.40
186.27
183.13
179.97
176.79
173.60
170.39
167.16
163.92
160.67
157.39
154.10
150.80
147.47

$528.34
$530.99
$533.64
$536.31
$538.99
$541.69
$544.39
$547.12
$549.85
$552.60
$555.36
$558.14
$560.93
$563.74
$566.56
$569.39
$572.23
$575.10
$577.97
$580.86
$583.77
$586.68
$589.62
$592.57
$595.53
$598.51
$601.50
$604.51
$607.53
$610.57
$613.62
$616.69
$619.77
$622.87
$625.98
$629.11
$632.26
$635.42
$638.60
$641.79
$645.00
$648.23
$651.47
$654.72
$658.00
$661.29
$664.59
$667.92

56,880.47
56,349.48
55,815.84
55,279.53
54,740.54
54,198.85
53,654.46
53,107.34
52,557.49
52,004.89
51,449.52
50,891.38
50,330.45
49,766.71
49,200.16
48,630.77
48,058.54
47,483.44
46,905.47
46,324.61
45,740.84
45,154.16
44,564.54
43,971.97
43,376.44
42,777.94
42,176.44
41,571.93
40,964.40
40,353.84
39,740.22
39,123.53
38,503.76
37,880.89
37,254.90
36,625.79
35,993.53
35,358.11
34,719.51
34,077.72
33,432.72
32,784.49
32,133.03
31,478.30
30,820.31
30,159.02
29,494.43
28,826.51

144.13
140.78
137.40
134.01
130.61
127.18
123.74
120.28
116.81
113.31
109.80
106.28
102.73
99.17
95.59
91.99
88.37
84.74
81.08
77.41
73.72
70.01
66.29
62.54
58.78
54.99
51.19
47.37
43.53
39.67
35.79
31.89
27.98
24.04
20.08
16.11
12.11
8.09
4.06

$671.26
$674.61
$677.99
$681.38
$684.78
$688.21
$691.65
$695.11
$698.58
$702.07
$705.58
$709.11
$712.66
$716.22
$719.80
$723.40
$727.02
$730.65
$734.31
$737.98
$741.67
$745.38
$749.10
$752.85
$756.61
$760.40
$764.20
$768.02
$771.86
$775.72
$779.60
$783.49
$787.41
$791.35
$795.31
$799.28
$803.28
$807.30
$811.33

28,155.25
27,480.64
26,802.66
26,121.28
25,436.50
24,748.29
24,056.64
23,361.54
22,662.96
21,960.88
21,255.30
20,546.19
19,833.53
19,117.31
18,397.51
17,674.11
16,947.09
16,216.43
15,482.13
14,744.15
14,002.48
13,257.10
12,508.00
11,755.15
10,998.54
10,238.14
9,473.95
8,705.93
7,934.07
7,158.35
6,378.75
5,595.26
4,807.85
4,016.50
3,221.19
2,421.91
1,618.63
811.33
0.00

ng a house that costs $160,000. You will put down 15% and finance the
30 years at 6% with monthly payments.

your monthly mortgage payments

he amortization schedule
function to calculate the principle portion of the 70th payment
function to calculate the interest portion of the 89th payment
your outstanding balance after 10 years (amount to be refinanced.

c)
Principle
PPMT

70
$191.00

d)
Interest
IPMT

89
$605.40

e)
o/s balance after
after
remaining payments
PV of remaining

10 years
120 payments
240
$113,812.59
113,812.59

1)
PMT
i
PVP

12,000.00
6%
200,000.00

b)
PMT12
i
PVP(11)

12000
6%
200,000.00

c)
PMT1
g
i
PVGP

12000
2%
6%
300,000.00

d)
delayed perpetuity

One step solution

PV(0)

Step 1 - Find PVP in year 7

PMT(8)
12000
i
6%
PVP(7)

200,000.00

Step 2 - Find PV of lump sum found in step 1

FV(7)
200,000.00
N
7
i
6%
PV(0)

$133,011.42

e)
delayed growing perpetuity
PMT(8)
12,000.00
g
2.50%
i
6%
step 1 - find PVGP(7)
PVGP(7)
$ 342,857.14

One step solution

PV(0)

Step 2 - Find PV(0) for lump sum found in step 1

FV(7)
$ 342,857.14
N
7
i
6%
PV(0)

2)
i
PVP
PMT

$228,019.58

??
1,000,000.00
20,000.00

3)
PVP
i
PMT
PMT

2.00%

100,000.00
8%
??
8,000.00

One step solution

$133,011.42

One step solution

$228,019.58

1)
You want to establish an endowment to allow your favorite charity
to withdraw $12,000 each year in a perpetuity. You found an
investment that will pay you 6% indefinitely.
a. How much do you have to deposit today to achieve this goal?
b. How much will you have in this account in 11 years.
c. How much do you have to invest today if you want the charity
to withdraw $12,000 next year and have this amount grow at 2%
in a perpetuity.

d. How much do you have to deposit today if you want the charity
to be able to withdraw $12,000 a year in a perpetuity with the first
withdrawal being in 8 years?
e. How much do you have to deposit today if you want the charity
to be able to withdraw $12,000 starting in year 8 and have this
amount grow by 2.5% indefinitely?

2)
What is your rate of return on an investment of $1,000,0
that will pay back $20,000 in a perpetuity.

3)
You paid $100,000 for a consol (perpetuity) that will earn
How much you get back each year?

our favorite charity

You found an

achieve this goal?

1 years.

u want the charity

mount grow at 2%

ou want the charity

petuity with the first

ou want the charity

r 8 and have this

vestment of $1,000,000
petuity.

petuity) that will earn 8%.

i
year

5%
cash
PV(0)
1 10,000.00
$9,523.81
2 20,000.00
$18,140.59
3
5,000.00
$4,319.19
4 15,000.00
$12,340.54
5
3,000.00
$2,350.58

PV(0)

2)
i
year

3)
i
year

$46,674.70

using NPV

$46,674.70

5%
0
1
2
3
4
5

PV(0)

Total

cash
2,000.00
10,000.00
20,000.00
5,000.00
15,000.00
3,000.00

using NPV

$48,674.70

5%
cash
N
1 10,000.00
2 20,000.00
3
5,000.00
4 15,000.00
5
3,000.00

FV(5)
4
3
2
1
0

Total FV
Alternative
Step 1 - find PV(0) using NPV function
PV(0)
$46,674.70
Step 2 - Find FV(5) for lump sum found in step 1
PV
$46,674.70
N
5
i
5%

$12,155.06
$23,152.50
$5,512.50
$15,750.00
$3,000.00
$59,570.06

FV(5)

b)
i
year

??
$59,570.06

5%
cash
1 10,000.00
2 20,000.00
3
5,000.00
4 15,000.00
5
3,000.00
Total FV

Alternative
Step 1 - find PV(0) using NPV function
PV(0)
$46,674.70
Step 2 - Find FV(11) for lump sum found in step 1
PV
$46,674.70
N
11
i
5%
FV(5)
??
$79,829.58

1) How much w
following cash

2) How much would you pay for an investmen

$2,000 today and the following cash flows ov
assuming an opportunity cost of 5%?

3)
a. How much would you end up with in your sav
of 5 years if you can earn 5% on the following d

b. How much would you end up with in your sav

of 11 years if you make the following deposits o
and earn 5%?

One step solution

$59,570.06

1) How much would you pay for an investment that will return the
following cash flows, assuming an opportunity cost of 5%?
year

cash
1
10000
2
20000
3
5000
4
15000
5
3000

pay for an investment that will return

llowing cash flows over the next 5 years,
y cost of 5%?

year
1
2
3
4
5

cash
10000
20000
5000
15000
3000

nd up with in your saving account at the end

5% on the following deposits?

nd up with in your saving account at the end

he following deposits over the next 5 years
year

cash
1
10000
2
20000
3
5000
4
15000
5
3000

year

cash
0
-40000
1
10000
2
20000
3
5000
4
15000
5
3000

rate using IRR

11.62%

11.62%

1) Calculate the average rate of return on an

investment that will cost you $40,000 today a
the following cash flow stream over the next

2) What rate of return would you be earning if you

make the following deposits in a saving account over
the next 5 years and end up with $60,000?

rage rate of return on an

cost you $40,000 today and return
ow stream over the next 5 years.

year

cash
1
10000
2
20000
3
5000
4
15000
5
3000

ou be earning if you
a saving account over
th $60,000?

year

cash
1
10000
2
20000
3
5000
4
15000
5
3000

Bank

rate
1
2
3
4
5
6
7

frequency of compounding per year

4.18%
4.15%
4.14%
4.08%
4.06%
4.04%
4% Continues

EAR
1
2
4
12
52
365

4.18%
4.19%
4.20%
4.16%
4.14%
4.12%
4.08%

1)
Which of the following banks would you rather invest in and why?

Bank

rate
1
2
3
4
5
6
7

4.18%
4.15%
4.14%
4.08%
4.06%
4.04%
4%

2)
You invested $10,000 in an investment that earns monthly retu
your investment is expected to double in 10 years.
a) Calculate your annual rate of return
b) Calculate the EAR on your investment
c) What is the periodic rate of return on your investment?

d) is this a better investment than a saving account that will ea

annual compounding? Why?

ng banks would you rather invest in and why?

frequency of compounding per year

1
2
4
12
52
365
Continues

,000 in an investment that earns monthly return. The value of

is expected to double in 10 years.
annual rate of return
EAR on your investment
riodic rate of return on your investment?

investment than a saving account that will earn you 7% with

ding? Why?

Bank

APR
1
2
3
4
5
6
7

PMT
N
i
m
FV(5)

freq
12.10%
11.90%
11.82%
11.75%
11.60%
11.50%
11.40% cont

1
2
4
12
52
365

FV(8) for 10K investment

$24,937.04
$25,212.47
$25,393.24
$25,483.03
$25,268.32
$25,089.27
$24,892.96

10000
5
12%
12
??

WRONG Way

$816,696.70

Correct way
Step 1 - find EAR
EAR
12.68%
Step 2 - find FV(5) using EAR and number of years
FV(5)
$64,395.55

EAR
12.10%
12.25%
12.35%
12.40%
12.29%
12.19%
12.08%

FV(8) for 10K using EAR

$24,937.04
$25,212.47
$25,393.24
$25,483.03
$25,268.32
$25,089.27
$24,892.96

You plan on making 10,000

The bank will pay you 12%
How much will you end up

One step solution

64,395.55

Assume you are invesing 10K for 8

years

plan on making 10,000 annual deposits for 5 years.

bank will pay you 12% with monthly compounding.
much will you end up with?