VM with Excel Assignment: There are two major goals for this assignment:

$($

$1$

$)$

$$to demonstrate your

understanding and the correct application of Time Value of Money concepts in a financial problem solving

situation, and

$($

$2$

$)$

$$to demonstrate your ability to use the TVM functions of Excel. This is intended to be a short

assignment

$-$

$$solving the problem shouldn

$$

t take more than

$3$

$0$

$-$

$4$

$5$

$$minutes$,$ plus a little more perhaps to make it

look nice.

When Yvonne was twelve, her grandfather gave her $

$5$

$,$

$0$

$0$

$0$

$$to be used for college. Yvonne was a good student

and dreamed of going to a good school so she invested the gift in a

$1$

$0$

$-$

year bank CD earning

$7$

$$

$\%$

$.$

$$She received a

generous scholarship and never needed to use the money from her grandfather.

After graduating from college at age

$2$

$2$

$,$

$$she began working at a great job. Knowing the value of early investing,

she began saving for retirement right away. When the CD matured she put it into an investment account earning

$6$

$$

$\%$

$$and made an additional annual investment of $

$1$

$,$

$5$

$0$

$0$

$$every January

$1$

st

$.$

$$She also opened an IRA account

and put $

$2$

$,$

$0$

$0$

$0$

$$into it every year on January

$1$

st and over the years it earned a steady

$7$

$\%$

$.$

$$

Now Yvonne is

$4$

$5$

$$and thinking she

$$

d like to retire early at age

$5$

$5$

$.$

$$At age

$6$

$5$

$$she

$$

ll get an extremely generous

corporate pension, which along with Social Security payments will allow her to live very well indeed. She

believes that with clever investing strategies both of her accounts will be able to earn

$8$

$\%$

$.$

$$She plans to continue

making the same annual contributions to her accounts until retirement. What Yvonne wants to know is whether

her retirement savings will be able to provide enough income each year to allow her to live comfortably until

age

$6$

$5$

$$when the pension kicks in

$.$

$1$

$.$

$$How much was the CD worth when she transferred it into that investment account?

$2$

$.$

$$How much is the investment account worth now?

$3$

$.$

$$How much is the IRA account worth now?

$4$

$.$

$$How much will she have accumulated when she takes early retirement?

$5$

$.$

$$How much will she be able to withdraw each January

$1$

st if she takes early retirement?

Guidelines:

$1$

$.$

$$Number and briefly explain each of your steps

$2$

$.$

$$Show your inputs for each step using the TVM functions of Excel, not the financial calculator

$3$

$.$

$$Laying out your solution using a timeline may help you visualize the cash flows better

$4$

$.$

$$Follow the facts as given in the narrative, but list any additional assumption