# Ecomics Using Excel Proffestional Hw

Content type
User Generated
Subject
Programming
School
University of Central Florida
Type
Homework
Rating
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Question 1.1
What is the future worth of \$1000 deposited today, 10 years from now If the APR is
a. 5% compounded yearly? Show interest earned and account balance at the end of every year using a
spreadsheet. Copy the spreadsheet on to the word file for submission. Check using a hand calculation.
year
value at the
beginning of the
year
interest earned
value at end of
the year
1
\$1,000.00
\$50.00
\$1,050.00
2
\$1,050.00
\$52.50
\$1,102.50
3
\$1,102.50
\$55.13
\$1,157.63
4
\$1,157.63
\$57.88
\$1,215.51
5
\$1,215.51
\$60.78
\$1,276.28
6
\$1,276.28
\$63.81
\$1,340.10
7
\$1,340.10
\$67.00
\$1,407.10
8
\$1,407.10
\$70.36
\$1,477.46
9
\$1,477.46
\$73.87
\$1,551.33
10
\$1,551.33
\$77.57
\$1,628.89
Hand calculation: Future value = \$1,000 * (1 + 5%)
10
= \$1,628.89
b. 5% compounded monthly? What is the effective annual interest rate in this case? Check using the
formula and also using a spreadsheet to calculate account balance at the end of year if interest is
compounded monthly. In your word file show the spreadsheet calculation of the effective interest rate
and the hand calculation as well.
year
value at the
beginning of the
year
interest
rate
(EAR)
interest earned
value at end of
the year
1
\$1,000.00
5.12%
\$51.16
\$1,051.16
2
\$1,051.16
5.12%
\$53.78
\$1,104.94
3
\$1,104.94
5.12%
\$56.53
\$1,161.47
4
\$1,161.47
5.12%
\$59.42
\$1,220.90
5
\$1,220.90
5.12%
\$62.46
\$1,283.36
6
\$1,283.36
5.12%
\$65.66
\$1,349.02
7
\$1,349.02
5.12%
\$69.02
\$1,418.04
8
\$1,418.04
5.12%
\$72.55
\$1,490.59
9
\$1,490.59
5.12%
\$76.26
\$1,566.85
10
\$1,566.85
5.12%
\$80.16
\$1,647.01
EAR = (1 + 5%/12)
12
1 = 5.11619%

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c. repeat part (a) for an APR of 10%. No need to show the spreadsheet this time. What is the difference
in Future Worth compared to 5% APR?
year
value at the
beginning of the
year
interest earned
value at end of
the year
1
\$1,000.00
\$100.00
\$1,100.00
2
\$1,100.00
\$110.00
\$1,210.00
3
\$1,210.00
\$121.00
\$1,331.00
4
\$1,331.00
\$133.10
\$1,464.10
5
\$1,464.10
\$146.41
\$1,610.51
6
\$1,610.51
\$161.05
\$1,771.56
7
\$1,771.56
\$177.16
\$1,948.72
8
\$1,948.72
\$194.87
\$2,143.59
9
\$2,143.59
\$214.36
\$2,357.95
10
\$2,357.95
\$235.79
\$2,593.74
If the APR is 10%, then the future worth will be \$2,593.74, which is \$964.85 higher than the future worth
when the APR is 5%.
\$2,593.74 - \$1,628.89 = \$964.85
The difference in interest earned is even more significant since using a 10% APR, total interest earned is
\$1,593.74, while with a 5% APR, total interest earned is \$628.89. By doubling the APR, the interest
earned multiplied by \$1,593.74 / \$628.89 = 2.5342 times.
Question 1.2
a. Setup a spreadsheet to compute the Present Worth of the following cash flows associated with a
project. APR is 5%, assume annual compounding.
Year
Cash flow
0
-\$20.000
1
\$4,000
2
\$4,000
3
\$5,000
4
\$7,000
5
\$5,000
6
\$5,000
APR
5%
NPV
\$5,164.45

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Question 1.1 What is the future worth of \$1000 deposited today, 10 years from now If the APR is a. 5% compounded yearly? Show interest earned and account balance at the end of every year using a spreadsheet. Copy the spreadsheet on to the word file for submission. Check using a hand calculation. Show your hand calculation results on your word file. year 1 2 3 4 5 6 7 8 9 10 value at the beginning of the year \$1,000.00 \$1,050.00 \$1,102.50 \$1,157.63 \$1,215.51 \$1,276.28 \$1,340.10 \$1,407.10 \$1,477.46 \$1,551.33 interest earned value at end of the year \$50.00 \$52.50 \$55.13 \$57.88 \$60.78 \$63.81 \$67.00 \$70.36 \$73.87 \$77.57 \$1,050.00 \$1,102.50 \$1,157.63 \$1,215.51 \$1,276.28 \$1,340.10 \$1,407.10 \$1,477.46 \$1,551.33 \$1,628.89 Hand calculation: Future value = \$1,000 * (1 + 5%)10 = \$1,628.89 b. 5% compounded monthly? What is the effective annual interest rate in this case? Check using the formula and also using a spreadsheet to calculate account balance at the end of year if interest is compounded monthly. In your word file show the spreadsheet calculation of the effective interest rate and the hand calculation as well. year value at the beginning of the year 1 \$1,000.00 2 \$1,051.16 3 \$1,104.94 4 \$1,161.47 5 \$1,220.90 6 \$1,283.36 7 \$1,349.02 8 \$1,418.04 9 \$1,490.59 10 \$1,566.85 12 EAR = (1 + 5%/12) – 1 = 5.11619% interest rate (EAR) interest earned value at end of the year 5.12% 5.12% 5.12% 5.12% 5.12% 5.12% 5.12% 5.12% 5.12% 5.12% \$51.16 \$53.78 \$56.53 \$59.42 \$62.46 \$65.66 \$ ...
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