Problem Assignment: Time Value of Money Use Excel Functions to correctly calculate answers to all problems below Explain in words what you do to make each calculation Explain in words what the answers mean In problems with an A and B part, explain what you learn from the difference 1 Answer: $25,335.40 Point Value Point Value 5.0% 2 Answer: $4,444.98 Point Value Point Value 5.0% 3 a Answer: $459,801.14 Point Value 5.0% 3 b Answer: You calculate Point Value 10.0% 4 a Answer: 25.55 years Point Value 5.0% 4 b Answer: You calculate Point Value 10.0% 5 a Answer: -$1,077.71 Point Value 7.5% 5 b Answer: You calculate Point Value 10.0% 6 Answer: 9.42% Point Value 7.5% 7 Answer: 8.66% Point Value 7.5% 8 a Answer: $1,916,674.18 Point Value 7.5% 8 b If you deposit $20,000 today in a Certificate of Deposit and earn 3% annual interest, how much will you have in 8 years? Melanie will receive a graduation gift of $5,000 from her parents in 3 years. If the discount rate is 4%, what is the gift worth today? Liz received a life insurance payout from her grandmother in the form of an annuity. She will get $25,000 per year for the next 30 years. How much is that worth today if the current long term interest rate is 3.5%? This is an ordinary annuity. If Interest rates rise to 6%, what will be the value today of the annuity in 3 a? You deposit $5,000 into an IRA account that invests in long term U S Treasury Bonds. Current Interest rates for the 20 year bond are 2.75%. How long will it take to double your money? How long will it take to triple your money at 2.75%? The Woods have $60,000 to use as a down-payment on a house, and they want to borrow $240,000 to buy a house for $300,000. The current annual mortgage interest rate is 3.5%. What will their monthly payment be for a 30 year loan that has equal monthly payments. They will owe zero at the end of the mortgage. Tim paid $250 per month into his 401K retirement plan. After 30 years, he had accumulated $500,000. What average annual rate of interest had he earned over the 30 years? For the year that ended in January 2000, Wal-Mart had revenues of $165 billion. For the year ended in January 2012, it had revenues of $447 billion. What has been the average compound growth rate? Mrs. Woods sees an advertisement for a 15 year loan at a rate of 2.75%. What would be the mortgage payment if they borrow $240,000 at this lower interest rate? Deniece has accumulated $50,000 in her thrift savings plan at her job at the Federal Aviation Administration. The government puts in 1% of her pay and matches up to another 4% if she puts in 5% out of her pay. Deniece earns $80,000 a year and plans to add 5% from her income plus the agency 5% for a total of $8,000 per year. Her cousin Eugene says that if she invests in stocks, she can earn 12% per year because that has been the long term history. How much will she have in 25 years at retirement if she can earn 12% per year compounded annually? Deniece's friend Marshall heard a speech by John C. (Jack) Bogle, founder of The Vanguard Group of Mutual Funds, one of the lowest cost and most successful group of funds. Jack said that with the increasing need to reduce carbon emissions, it is unlikely that long term stock returns can exceed 6% per year. Steps to reduce carbon will likely reduce prospects for
