Suppose your opportunity cost (interest rate/year) is 11% compounded annually. How much must you deposit in an account today if you want to pay yourself $230 at the end of each of the next 15 years? How much must you deposit if you want to pay yourself $230 at the beginning of each of the next 15 years
Suppose your opportunity cost (interest rate/year) is 11% compounded annually. How much must you deposit in an account today if you want to pay yourself $230 at the end of each of the next 15 years? How much must you deposit if you want to pay yourself $230 at the beginning of each of the next 15 years
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Percentages need to be entered in decimal format, for instance 3% would be entered as .03 in the interest rate cells.)
- Suppose your
opportunity cost (interest rate/year) is 11% compounded annually. How much must you deposit in an account today if you want to pay yourself $230 at the end of each of the next 15 years? How much must you deposit if you want to pay yourself $230 at the beginning of each of the next 15 years? - Bruce invested $1,250 (
present value - enter as a negative number) 10 years ago. Today, the investment is worth $3,550 (future value ). If interest is compounded annually, what annualrate of return did Bruce earn on his investment? (Use Solving for r - Rate of Return- on a Lump Sum) - Mario wants to take a trip that costs $4,750 (future value), but currently he only has $2,260 (present value - enter as a negative number) saved. If Mario invests this money at 7% compounded annually, how long will it take for his investment to grow to the needed amount of $4,750? Round to the nearest whole number representing the number of years. (Use Solving for n - Time - on a Lump Sum)
Transcribed Image Text:Jx
Future Value of a Lump Sum Amount
A
C
E
H.
Future Value of a Lump Sum Amount
Add information into yellow highlighted cells
2 Number of Years
N=
B Interest Rate / Year
I/Y=
4 Present Value
PV=
5 Payment made each period
PMT=
Definition of Terms in the Formulas:
PMT Type
7
FV= $
N is the number of years.
I/Y is the interest rate per year. Can be divided by 12 to determine a monthly interest rat
determine a quarterly interest rate.
PV is the present value. This is ALWAYS entered as a negative value showing a cash outfle
PMT is the amount of payment made each period. For lump sum problems, this is left bla
8.
Future Value of a an Annuity
10 Number of Years
N=
no payments are made.
PMT Type is a value representing the timing of payment: 1 equals payment at the beginni
period, and 0 (or blank cell) equals payment at the end of the period.
11 Interest Rate / Year
I/Y=
12 Present Value
PV=
13 Payment made each period
PMT=
14
PMT Type
15
FV= $
16
17
Dresent Value of a lumn Sum Amount
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