6 homework questions using excel

Future value: Chuck Tomkovick is planning to invest $25,000 today in a mutual fund that will provide a return of 8 percent each year. What will be the value of the investment in ten years?

5.1. Future value: Chuck Tomkovick is planning to invest $25,000 today in a mutual fun that will provide a return of 8 percent each year. What will be the value of the investment in ten years? 25,000 today in a mutual fund will be the value of the 5.2. Future value: Ted Rogers is investing $7,500 in a bank CD that pays a 6 percent annual interest. How much will the CD be worth at the end of five years? 5.3. Future value: Your aunt is planning to invest in a bank deposit that will pay 7.5 percent annual interest compounded semiannually. If she has $5,000 to invest, how much will she have at the end of four years? bank deposit that will pay 7.5 percent e has $5,000 to invest, how much will 5.4. Future value: Kate Eden received a graduation present of $2,000 that she is planning on investing in a mutual fund that earns 8.5 percent each year. How much money will she have in three years? t of $2,000 that she is ercent each year. How 5.5. Future value: Your bank pays 5 percent annual interest compounded semiannually on your savings account. You don't expect to add to the current balance of $2,700 over the next four years. How much money can you expect to have at the end of this period? 5.6. Future value: Your birthday is coming up and instead of any presents, your parents promised to give you $1,000 in cash. Since you have a part-time job and, thus, don't need the cash immediately, you decide to invest the money in a bank CD that pays 5.2 percent annually, compounded quarterly for the next two years. How much money can you expect to gain in this period of time? 5.7. Multiple compounding periods: Find the future value of a five year $100,000 investment that pays 8.75 percent and that has the following compounding periods: a.Quarterly b.Monthly c.Daily d.Continuous 5.8. Growth rates: Joe Maur, a catcher for the Minnesota Twins is expected to hit 15 home runs in 2014. If his home-run-hitting ability is expected to grow by 12 percent every year for the following five years, how many home runs is he expected to hit in 2019? 5.9. Present value: Roy Gross is considering an investment that pays 7.6 percent, compounded anually. How much will he have to invest today such that the investment will be worth $25,000 in six years? stment that pays 7.6 percent, invest today such that the 5.10. Present value: Maria Addai has been offered a future payment of $750 two years from now. If she can earn 6.5 percent compounded annually on her investment, what should she pay for this investment today? 5.11. Present value: Your brother has asked you for a loan and has promised to pay you $7,750 at the end of three years. If you normally invest to earn 6 percent per year, how much will you be willing to lend to your brother if you view this purely as a financial transaction (e.g., you don't give your brother a special deal)? 5.12. Present value: Tracy Chapman is saving to buy a house in five years. She plans to pu percent down at that time, and she believes that she will need $35,000 for the down p If Tracy can invest in a fund that pays 9.25 percent annually, how much will she need today? ve years. She plans to put 20 ed $35,000 for the down payment. how much will she need to invest 5.13. Present value: You want to buy some bonds that have a value of $1,000 at the end of seven years. The bonds are said to pay 4.5 percent interest annually. How much should you pay for them today? 5.14. Present value: Elizabeth Sweeney wants to accumulate $12,000 by the end of 12 years. If the annual interest rate is 7 percent, how much will she have to invest today to achieve her goal? 5.15. Interest rate: You are in a desperate need of cash and turn to your uncle, who has offered to lend you some money. You decide to borrow $1,300 and agree to pay back $1,500 in two years. Alternatively, you could borrow from your bank that is charging 6.5 percent interest annually. Should you go with your uncle or the bank? 5.16. Number of periods: You invest $150 in a mutual fund today that pays 9 percent interest annually. How long will it take to double your money? 5.17. Future value: Your finance textbook sold 53,250 copies in its first year. The publishing company expects the sales to grow at a rate of 20 percent for the next three years, and by 10 percent in the fourth year. Calculate the total number of copies that the publisher expects to sell in years 3 and 4. Draw a time line to show the sales level for each of the next four years. 5.18. Future value: CelebNav, Inc., had sales last year of $700,000, and the analysts are pred the start-up, with sales growing 20 percent a year for the next three years. After that, the percent per year for two years, at which time the owners are planning to sell the compan projected sales for the last year before the sale? $700,000, and the analysts are predicting a good year for r the next three years. After that, the sales should grow 11 ners are planning to sell the company. What are the 5.19. Future Value: You decide to take advantage of the current online dating craze and start your own Web site. You know that you have 450 people who will sign up immediately and, through a careful marketing research and analysis, determine that membership can grow by 27 percent in the first two years, 22 percent in year 3, and 18 percent in year 4. How many members do you expect to have at the end of four years? 5.20. Multiple compounding periods: Find the future value of an investment of $2,500 made today for the following rates and periods: a. 6.25 percent compounded semiannually for 12 years b. 7.63 percent compounded quarterly for 6 years c. 8.9 percent compounded monthly for 10 years d. 10 percent compounded daily for 3 years e. 8 percent compounded continuously for 2 years lue of an investment of $2,500 5.21 Multiple compounding periods: Find the present value of $3,500 under each of the following rates and periods: a. b. c. d. 8.9 percent compounded monthly for five years. 6.6 percent compounded quarterly for eight years. 4.3 percent compounded daily for four years. 5.7 percent compounded continuously for three years. 5.22 Multiple compounding periods: Samantha is looking to invest some money, so she can collect $5,500 at the end of three years. How much should she invest today? a. 4.2 percent compounded daily b. 4.9 percent compounded monthly c. 5.2 percent compounded quarterly d. 5.4 percent compounded annually 5.23. Time to grow: Zephyr Sales Company has currently reported sales of $1.125 million. If the company expects its sales to grow 6.5 percent annually, how long will it be before the company can double its sales? Use a financial calculator to solve this problem. 5.24. Time to grow: You are able to deposit $850 in a bank CD today, and you will withdraw th money only once the balance is $1,000. If the bank pays 5 percent interest, how long wi take you to attain your goal? and you will withdraw the cent interest, how long will it 5.25. Time to grow: Neon Lights Company is a private company with sales of $1.3 million a year. Management wants to go public but has to wait until the sales reach $2 million. If sales are expected to grow at a steady 12 percent annually, when is the earliest that Neon Lights will go public? mpany with sales of $1.3 million a it until the sales reach $2 million. If nnually, when is the earliest that #5.26 Time to Grow: You have just inherited $550,000. You plan to save this money and continue to are earning in your current job. If you can invest the money in a bond that pays 4.6 percent in it be before your inheritance is worth $1 million? money and continue to live off the money that you hat pays 4.6 percent interest annually, how long will 5.27. Growth rates: Xenix Corp had sales of $353,866 in 2014. If management expects its sales to be at $476,450 in three years, what is the rate at which the company's sales are expected to grow? 5.28. Growth rate: Infosys Technologies, Inc., an Indian technology company, reported a net income of $419 million this year. Analysts expect the company's earnings to be $1.468 billion in five years. What is the expected growth rate in the company's earnings? 5.29. Present value: Caroline Weslin needs to decide whether to accept a bonus of $1,820 today or wait two years and receive $2,100 then. She can invest at 6 percent. What should she do? #5.30 Refer to problem 5.29. Congress and the president have decided to increase the fe an effort to reduce the budget deficit. Suppose that Caroline Weslin, from problem percent of her bonus to the federal government for taxes if she accepts the bonus t percent if she receives her bonus in two years. Will the increase in tax rates affect dent have decided to increase the federal tax rate in that Caroline Weslin, from problem 5.29, will pay 35 for taxes if she accepts the bonus today and 40 Will the increase in tax rates affect her decision? 5.31 You have $2,500 you want to invest in your classmate's start-up business. You believe the business idea to be great and hope to get $3,700 back at the end of three years. If all goes according to plan, what will your return on investment be? 5.32 Patrick Seeley has $2,400 that he is looking to invest. His brother approached him with an investment opportunity that could double his money in four years. What interest rate would the investment have to yield in order for Patrick's brother to deliver on his promise? 5.33 You have $12,000 in cash. You can deposit it today in a mutual fund earning 8.2 percent semiannually, or you can wait, enjoy some of it, and invest $11,000 in your brother's business in two years. Your brother is promising you a return of at least 10 percent on your investment. Whichever alternative you choose, you will need to cash in at the end of ten years. Assume your brother is trustworthy and both investments carry the same risk. Which one will you choose? 5.34 When you were born your parents set up a bank account in your namewith an initial investment of $5,000. You are turning 21 in a few days and will have access to all your funds. The account was earning 7.3 percent for the first seven years then the rates went down to 5.5 percent for six years. The economy was doing well at the end of the 1990s and your account was earning 8.2 percent for three years in a row. Unfortunately, the next two years you earned only 4.6 percent. Finally, as the economy recovered, your return jumped to 7.6 percent for the last three years. a. How much money was in your account before the rates went down drastically at the end of year 16? b. How much money is in your account now, at the end of year 21? c. What would be the balance now if your parents made another deposit of $1,200 at the end of year 7? ur namewith an initial have access to all even years then the s doing well at the end ee years in a row. Finally, as the last three years. own drastically at the deposit of $1,200 at the 5.35 Eric Fisher, a number 1 draft pick of the Kansas City Chiefs, and his agent are evalu contract options. Each option offers a signing bonus and a series of payments over th contract. Fisher uses a 10.25 percent rate of return to evaluate the contracts. Given t each option, which one should he choose? as City Chiefs, and his agent are evaluating three bonus and a series of payments over the life of the eturn to evaluate the contracts. Given the cash flows for 5.36 Surmec, Inc., has reported sales of $2.1 million last year. The company's primary business line is manufacturing of nuts and bolts. Since this is a mature industry, the analysts are certain that the sales will grow at a steady rate of 7 percent a year. The company reports net income that represents 23 percent of sales. The management would like to buy a new fleet of trucks but can only do so once the profit reaches $620,000 a year. At the end of what year will they be able to buy the new fleet of trucks? What will the sales and profit be that year? 5.37 You will be graduating in two years, and are thinking about your future. You know that you will want to buy a house five years after you graduate and that you will want to put down $60,000. As of right now, you have $8,000 in your savings account. You are also fairly certain that once you graduate, you can go work in the family business and earn $32,000 a year, with a 5 percent raise every year. You plan to live with your parents for the first two years after graduation, which enable you to minimize your expenses and put away $10,000 each year. The next three years, you will have to live ou your own as your younger sister will be graduating from college and has already announced her plan to move back int family house. Thus, you will be able to save only 13 percent of your annual salary. Assume that you will be able to inve savings from your salary at 7.2 percent. At what interest rate will you need to invest the current savings account balan order to achieve your goal? Hint: Draw a time line that shows all the cash flows for years 0 through 7. Remember, you want to buy a house seven years from now and your first salary will be in year 3. uture. You know that you will want to buy a house five 000. As of right now, you have $8,000 in your savings can go work in the family business and earn $32,000 a parents for the first two years after graduation, which will ch year. The next three years, you will have to live out on and has already announced her plan to move back into the our annual salary. Assume that you will be able to invest you need to invest the current savings account balance in hrough 7. Remember, you want to buy a house seven STP #5.1. Santiago Hernandez is planning to invest $25,000 in a money market account for two years. The account pays interest of 5.75 percent compounded on a monthly basis. How much money will Santiago Hernandez have at the end of two years? STP #5.2. Michael Carter is expecting an inheritance of $1.25 million in four years. If he had t money today, he could earn interest at an annual rate of 7.35 percent. What is the present value of this inheritance? in four years. If he had the 35 percent. What is the STP #5.3. What is the future value of an investment of $3,000 after three years with compounding at the following rates and frequencies: 8.75a.percent compounded monthly 8.625 b. percent compounded daily 8.5 percent c. compounded continuously STP #5.4. Twenty-five years ago, Amanda Carter investec $10,000 in an account paying an annual interest rate of 5.75 percent. W is the value of the investment today? What is the interest on interest earned on this investment? nual interest rate of 5.75 percent. What nvestment? STP #5.5 You just bought a corporate bond at $863.75 today. In five years thebond will mature and you will receive $1,000. What is the rate of returnon this bond