# Financial math with excel, assignment help

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strongboss5
School: Carnegie Mellon University

Dear student,Please find enclosed a doc file containing the step by step solution to the different questions, together with an xls file with the different calculations. In the xls file, each question is presented as an independent worksheet so that you can find them easily

Question 1
a) Time value of money represents the actual value we give to money. It appears as a necessary
concept to understand why even while a \$100 bill has the same monetary value both now and in
the future. This can easily be understood by considering that if we have the money available right
now, we would be able of investing it, such that in the future we would have both the available
money (the \$100 bill) and the interests that have matured from it. This concept is further analysed
through the examples in section b.
b)
1. Since no further information is provided, we will assume a simple interest investment to evaluate
the future value. According to this, the relationship between the current and future value of money
would be given by the formula:
πππ¦π
πΉπ’π‘π’ππ π£πππ’π = πΆπ’πππππ‘ π£πππ’π (1 + ππππ’ππ πππ‘ππππ π‘ πππ‘π β
)
365
Taking this into account, we find:
Current value = \$120
Interest rate = 7.5% annually
Time = 120 days
πΉπ’π‘π’ππ π£πππ’π = 120 (1 + 0.075 β

120
) = \$122.96
365

2. Since we are told that there are no interest payments in the 7 year period, we should assume a
simple interest regime. Taking this into account, we would calculate the annual interest rate by
applying the formula
πΉπ’π‘π’ππ π£πππ’π
1
π=(
β 1) β
πΆπ’πππππ‘ π£πππ’π
ππ’ππππ ππ π¦ππππ
Taking this into account, we find:
1360.86
1
π=(
β 1) β = 5.16%
1000
7
3. Considering an annual interest rate of 12%, we can easily calculate the corresponding quarterly and
monthly interest rates by taking into account that one year has 3 quarters and 12 months. Thus,
the corresponding quarterly and monthly interest rates would be:
ππ’πππ‘ππππ¦ πππ‘ππππ π‘ πππ‘π =
ππππ‘βππ¦ πππ‘ππππ π‘ πππ‘π =

ππππ’ππ πππ‘ππππ π‘ πππ‘π 12
=
= 3%
4
4

ππππ’ππ πππ‘ππππ π‘ πππ‘π 12
=
= 1%
12
12

If we calculate the effective annual rates assuming it was compounded quarterly or monthly, we
would find:
π΄πππ’ππ πππ‘π (ππππππ’ππππ ππ’πππ‘ππππ¦) = (1 + 0.03)4 = 12.55%
π΄πππ’ππ πππ‘π (ππππππ’ππππ ππππ‘βππ¦) = (1 + 0.01)12 = 12.68%

Question 2
a) Some statistical concepts that are commonly used in finance include:
The mode, which represents the financial value that is repeated most frequently
The arithmetic mean, which is calculated by adding up all the financial va...

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