Time value of money, Accounting class

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Time value of money problem

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King's College Fall 2017 ACCT115L Lab Project 08: Using Time Value of Money Functions in Excel TVM-1: Determine the amount that would accumulate for the following investment: $10,050 invested at the start of a year, at 10% per annum, compounded annually for 6 years. Solve using the Present and Future Value Tables found at the end of the textbook or those separately provided by the instructor (see Moodle). Hint: This is a future value calculation. Use Table: Future Value of $1. Factor: Multiply 1.77156 $ 10,050 X 1.77156 = $ 17,804 = $ 17,804 Solve using appropriate function in Excel: Use FV: ($17,804) X -1 TVM-2: Determine the amount that would accumulate for the following investment: $650 invested at the start of a year, at 12% per annum, compounded quarterly for 10 years. Solve using the Present and Future Value Tables found at the end of the textbook or those separately provided by the instructor (see Moodle). Hints: This is a future value calculation. Also, because it involves quarterly compounding, divide the annual percent by 4 and multiply the periods times 4 because the tables are designed for annual increments. Use Table: Factor: Multiply X = Solve using appropriate function in Excel: Use FV: X = 20171126133001acct115l_project08_tvm_alhajjaj_f.xlsx Page 1 of 5 TVM Project Worksheet King's College Fall 2017 ACCT115L Lab Project 08: Using Time Value of Money Functions in Excel TVM-3: Determine the amount that would accumulate for the following investment: $5,000 invested at start of year, at 9% per annum, compounded annually for 4 years, and then reinvested at 16% per annum, compounded semiannually for four more years. Solve using the Present and Future Value Tables found at the end of the textbook or those separately provided by the instructor (see Moodle). Hints: This is a future value calculation. Also, it involves two steps. First calculate the future value of $5,000, compounded annually for 4 years and then use that result to calculate the reinvestment. Also, because it involves semiannual compounding, divide the annual percent by 2 and multiply the periods times 2, when calculating the future value of the reinvestment, because the tables are designed for annual increments. Step 1: Use Table: Factor: Multiply X = X = Step 2: Use Table: Factor: Multiply Solve using appropriate function in Excel: Step 1: Use FV: X = Step 2: Use FV: X = 20171126133001acct115l_project08_tvm_alhajjaj_f.xlsx Page 2 of 5 TVM Project Worksheet King's College Fall 2017 ACCT115L Lab Project 08: Using Time Value of Money Functions in Excel TVM-4: Determine the amount that must be deposited now at compound interest to provide the desired sum: Amount to be invested, at the start of a year, for 10 years at 6% per annum, compounded semiannually, to equal $17,000, by the end of 10 years. Solve using the Present and Future Value Tables found at the end of the textbook or those separately provided by the instructor (see Moodle). Hint: This is a present value calculation. Also, because it involves semiannual compounding, divide the annual percent by 2 and multiply the periods times 2 because the tables are designed for annual increments. Use Table: Present Value of $1 Factor: Multiply 0.55368 $ 17,000 X 0.55368 = $ 9,413 = $ 9,412 Solve using appropriate function in Excel: Use PV: ($9,412) X -1 TVM-5: Determine the amount that must be deposited now at compound interest to provide the desired sum: Amount to be invested at the start of a year, for 2.5 years at 8% per annum, compounded quarterly, to equal $5,000, by. the end of 2.5 years. Solve using the Present and Future Value Tables found at the end of the textbook or those separately provided by the instructor (see Moodle). Hints: This is a present value calculation. Also, because it involves quarterly compounding, divide the annual percent by 4 and multiply the periods times 4 because the tables are designed for annual increments. Use Table: Factor: Multiply X = Solve using appropriate function in Excel: Use PV: X = 20171126133001acct115l_project08_tvm_alhajjaj_f.xlsx Page 3 of 5 TVM Project Worksheet King's College Fall 2017 ACCT115L Lab Project 08: Using Time Value of Money Functions in Excel TVM-6: Determine which alternative will yield the better return: Alston has $10,000 to invest. The first alternative, depositing the cash in his credit union account, will yield 11% per year, compounded annually for 4 years. The second alternative is to deposit the $10,000 in a bank that will pay 10% per year, compounded quarterly for four years. Which alternative should Alston select? Solve using the Present and Future Value Tables found at the end of the textbook or those separately provided by the instructor (see Moodle). Hint: This is a future value calculation. 1. First Alternative: Use Table: Factor: Multiply X = Solve using appropriate function in Excel: Use FV: X = X = 2. Second Alternative: Use Table: Factor: Multiply Solve using appropriate function in Excel: Use FV: X = Which alternative is better? 20171126133001acct115l_project08_tvm_alhajjaj_f.xlsx Page 4 of 5 TVM Project Worksheet King's College Fall 2017 ACCT115L Lab Project 08: Using Time Value of Money Functions in Excel TVM-7: Determine which alternative will yield the better return at the end of 5 years: First Alternative is that Beatrice invests $10,000 annually, at the beginning of the year, for each of 5 years, at an annual interest rate of 8%, interest compounds annually. The Second Alternative is that Beatrice invests $5,150 at the beginning of each of 10 consecutive 6-month periods, at an annual interest rate of 8%, interest compounds semiannually. Which alternative should Beatrice select? Solve using the Present and Future Value Tables found at the end of the textbook or those separately provided by the instructor (see Moodle). Hint: This is a future value calculation, using the annuity due process. 1. First Alternative: Use Table: Factor: Multiply X = Solve using appropriate function in Excel: Use FV: X = X = 2. Second Alternative: Use Table: Factor: Multiply Solve using appropriate function in Excel: Use FV: X = Which alternative is better? Why did you choose the alternative you chose? Enter answer here: 20171126133001acct115l_project08_tvm_alhajjaj_f.xlsx Page 5 of 5 TVM Project Worksheet ...
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Tutor Answer

uoscar
School: University of Virginia

The solution is attached.Please, let me know if you need further explanation.

King's College
Fall 2017
ACCT115L
Lab Project 08: Using Time Value of Money Functions in Excel

TVM-1:
Determine the amount that would accumulate for the following investment:
$10,050 invested at the start of a year, at 10% per annum, compounded annually for 6 years.
Solve using the Present and Future Value Tables found at the end of the textbook or those
separately provided by the instructor (see Moodle). Hint: This is a future value calculation.
Use Table:

Future Value of $1.

Factor:
Multiply

1.77156
$

10,050

X

1.77156

=

$

17,804

=

$

17,804

Solve using appropriate function in Excel:
Use FV:

($17,804)

X

-1

TVM-2:
Determine the amount that would accumulate for the following investment:
$650 invested at the start of a year, at 12% per annum, compounded quarterly for 10 years.
Solve using the Present and Future Value Tables found at the end of the textbook or those
separately provided by the instructor (see Moodle). Hints: This is a future value calculation. Also,
because it involves quarterly compounding, divide the annual percent by 4 and multiply the
periods times 4 because the tables are designed for annual increments.
Use Table:

Future Value of $1.

Factor:
Multiply

3.26304
$

650

X

3.26304

=

$

2,121

=

$

2,120

Solve using appropriate function in Excel:
Use FV:

($2,120)

X

-1

20171128020141acct115l_project08_tvm_alhajja...

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