Percentages need to be entered in decimal format, for instance 3% would be entered as .03 in the interest rate cells.) If Samantha invests $700 today in an account that pays 4% interest compounded annually, how much will she have in her account four years from today? How much will she have in eight years and 12 years from today? (Use Future Value of a Lump Sum) What is the present value of $1,500 due in 14 years at a 5% interest rate? At a 10% interest rate? Explain why the present value is lower when the interest rate is higher. (Use Present Value of a Lump Sum) Matt is considering the purchase of an investment that will pay him $12,500 in 12 years. If Matt wants to earn a return equal to 7% per year (annual compounding), what is the maximum amount he should be willing to pay for the investment today? (Use Present Value of a Lump Sum Amount) At the end of each of the past 14 years, Vanessa deposited $450 in an account that earned 8% compounded annually. How much is in the account today? How much would be in the account if the deposits were made at the beginning of each year (PMT Type) than at the end of each year? (Use Future Value of an Annuity) 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 annual rate 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) JxFuture Value of a Lump Sum AmountACEH.Future Value of a Lump Sum AmountAdd information into yellow highlighted cells2 Number of YearsN=B Interest Rate / YearI/Y=4 Present ValuePV=5 Payment made each periodPMT=Definition of Terms in the Formulas:PMT Type7FV= $N is the number of years.I/Y is the interest rate per year. Can be divided by 12 to determine a monthly interest ratdetermine a quarterly interest rate.PV is the present value. This is ALWAYS entered as a negative value showing a cash outflePMT is the amount of payment made each period. For lump sum problems, this is left bla8.Future Value of a an Annuity10 Number of YearsN=no payments are made.PMT Type is a value representing the timing of payment: 1 equals payment at the beginniperiod, and 0 (or blank cell) equals payment at the end of the period.11 Interest Rate / YearI/Y=12 Present ValuePV=13 Payment made each periodPMT=14PMT Type15FV= $1617Dresent Value of a lumn Sum AmountSheet118150%Ready11:01 PM梦 $10/1/2020O Type here to searchBANG&OUFSCNdelete144nckspace&%2478U96

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Answered: If Samantha invests $700 today in an…

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.)

If Samantha invests $700 today in an account that pays 4% interest compounded annually, how much will she have in her account four years from today? How much will she have in eight years and 12 years from today? (Use Future Value of a Lump Sum)
What is the present value of $1,500 due in 14 years at a 5% interest rate? At a 10% interest rate? Explain why the present value is lower when the interest rate is higher. (Use Present Value of a Lump Sum)
Matt is considering the purchase of an investment that will pay him $12,500 in 12 years. If Matt wants to earn a return equal to 7% per year (annual compounding), what is the maximum amount he should be willing to pay for the investment today? (Use Present Value of a Lump Sum Amount)
At the end of each of the past 14 years, Vanessa deposited $450 in an account that earned 8% compounded annually. How much is in the account today? How much would be in the account if the deposits were made at the beginning of each year (PMT Type) than at the end of each year? (Use Future Value of an Annuity)
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 annual rate 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)

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
Sheet1
18
150%
Ready
11:01 PM
梦 $
10/1/2020
O Type here to search
BANG&OUFSCN
delete
144
nckspace
&
%24
7
8
U
96

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