# Compound Interest Computation discussion

**Question description**

The CEO has decided to plan for a salary action affecting a number of individuals in the organization. He has decided to give a $2,000 cost-of-living pay increase to all hourly employees and a $4,000 increase to all software analysts with salaries less than $55,000. However, he wants to do this in 2 years. He wants you to give him two options (you do not have to recommend an option).

**Option 1:** How much would he have to invest today in a single lump sum at a 6% annual interest rate compounded quarterly to have sufficient funds to execute his plan?

**Option 2:** How much would he have to invest in equal monthly payments at a 3% annual interest rate compounded monthly to have sufficient funds to execute his plan?

**Part 1**: Select the following link to download the Microsoft Excel spreadsheet for this assignment: Individual Project Data.

Because the CEO wants to increase salaries for all hourly employees and software analysts, there needs to be a count of the employees in each category.

- Create an additional worksheet named “DB Calculations.”
- Set up a criteria range in the first few rows and columns to identify all hourly employees. Use this criteria in the Advanced Filter feature to extract all hourly employees.
- Set up a second criteria range in the columns next to the first to identify the software analysts with salaries less than $55,000. Use this criteria in the Advanced Filter feature to extract all hourly employees.
- In any cell beneath each criteria range, use the DCOUNT function to calculate the number of hourly employees using the first criteria range, and then again to calculate the number of software analysts with salaries less than $55,000.
- Multiply the count of hourly employees by 2,000, and the count of software analysts with salaries less than $55,000 by 4,000. The sum of these two numbers will be the total funding needed to execute the CEO’s plan.

**Part 2**: Use the funding you calculated in Part 1 and the appropriate compound interest formulas you learned in business algebra to calculate the investment amounts for options 1 and 2. Show your calculations in any empty area on the worksheet created in Part 1.

Hints:

Excel Functions:

PV – Returns the present value of a future amounthome work

PMT – Calculates the payment necessary to accumulate a future amount

Compound Interest Formulas:

A = P(1 +i)^{n}

FV = PMT ×(1 +i)^{n}– 1

I

## Tutor Answer

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors