Finance Assignment: Final future value Calculation

Finance Assignment: Final future value Calculation.


Finance Assignment Due Sunday

Category: Finance
Deadline: 23hrs


Answer the following problems in an Excel file. Please upload only one Excel file with all of your answers, including #3 (which requires an explanation rather than a calculation). All problems must be solved using the PV and FV functions in Excel. I should be able to see your formulas in the “bar” at the top of your spreadsheet. Name your file your last name_Assign#8. The due date is 11:59PM on Mar. 24. Late assignments are not accepted. 1) If I deposit $8,000 in a bank account that pays interest of 1.5%, compounded annually, how much will I have in the account after 10 years? 2) If I deposit $8,000 in a bank account that pays simple interest of 1.5%, how much will I have in the account after 10 years? 3) How would you explain the difference in the answers to the foregoing two problems, given that both banks pay interest at the same rate? Be specific. 4) You graduate from LIM and obtain a job paying an annual salary of $35,000. You estimate that you will receive a 10% salary increase each year. If you receive those salary increases, how much will you be earning after 4 years? 5) You deposit $5,000 in a bank account today that pays 2% interest, compound annually. You make no withdrawals from the account until 4 years have passed and then you withdraw all of the money that has accumulated in that account and deposit it into another bank that pays 3% interest compounded annually. You leave your money in the second bank for an additional 3 years. How much money will you have after the 7 years?

1Compounded interest
Interest rate; c.a1.50%
Time in years10
Compounding times per year1
Future value$9,284.33
2Simple interest
Interest rate; c.a1.50%
Time in years10
Interest  $1,200.00
Future value$9,200.00
3The difference in the two options presented in 1 and 2 above is based on the amounts used in obtaining the respective interest. Usually, the future value obtained using the compound interest  is higher than that using simple interest. The reasoning behind it is that in simple interest option, interest is paid only on the principal amount saved while that for the compound interest, it is done on the principal amount and accumulated interest during every period resulting to higher interest hence final amount. 
4Salary–compound interest
Annual salary$35,000
Annual increase rate10%
Time in years4
5Compound interest
           Bank A
Interest rate – annual2%
Time in years4
Future value for bank A$5,412.16
           Bank B
Deposit; FV$5,412.16
Interest rate – annual3%
Time in years3
Final future value$5,914.01

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