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Time Value of Money

In: Business and Management

Submitted By kjaskew
Words 2103
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GBA 7211 Introduction to Finance I
Individual Graded Assignment
a. Find the FV of $1,000 invested to earn 10% annually 5 years from now. Answer this question by using a math formula and also by using the Excel function wizard.
Inputs:

Formula:
Wizard (FV):

PV =
I/YR =
N =
FV = PV(1+I)^N =

1000
10%
5
$

1,610.51
$1,610.51

Note: When you use the wizard and fill in the menu items, the result is the formula you see on the formula line if you click on cell E12. Put the pointer on E12 and then click the function wizard (fx) to see the completed menu. Also, it is generally easiest to fill in the wizard menus by clicking on one of the menu slots to activate the cursor and then clicking on the cell where the item is given. Then, hit the tab key to move down to the next menu slot to continue filling out the dialog box.
Experiment by changing the input values to see how quickly the output values change.
b. Now create a table that shows the FV at 0%, 5%, and 20% for 0, 1, 2, 3, 4, and 5 years. Then create a graph with years on the horizontal axis and FV on the vertical axis to display your results.

Begin by typing in the row and column labels as shown below. We could fill in the table by inserting formulas in all the cells, but a better way is to use an Excel data table Note that the Row Input Cell is D9 and the Column Input Cell is D10, and we set Cell B32 equal to Cell E11. Then, we selected (highlighted) the range B32:E38, then clicked
Data, Table, and filled in the menu items to complete the table.
Years (D10):
$ 1,610.51
0
1
2
3
4
5

Interest Rate (D9)
0%
5%
$1,000.00
$1,000.00
$1,000.00
$1,050.00
$1,000.00
$1,102.50
$1,000.00
$1,157.63
$1,000.00
$1,215.51
$1,000.00
$1,276.28

20%
$1,000.00
$1,200.00
$1,440.00
$1,728.00
$2,073.60
$2,488.32

To create the graph, first select the range C33:E38. Then

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