Question 1 (5 points)
You want to buy a $300,000 house. You plan to make a down payment of 20% of the purchase price and finance the rest with a 30-year fixed rate mortgage loan. The loan is fully amortizing, and requires monthly payments at the end of each month. The nominal loan rate is 5%, compounded monthly. 1) How much of the purchase price will you finance with the mortgage loan? 2) What is your anticipated monthly mortgage payment?
Question 2 (5 point)
Suppose that you deposit $200 at the end of each month into an account paying an expected annual rate of return of 3%, compounded monthly. How much money will you have in the account in 10 years?
Question 3 (5 point)
An investment offers to pay you $300 per quarter for 10 years. If the annual rate is 11% with quarterly compounding, then what is the present value of these cash flows?
Question 4 (5 point)
You currently have $4,000 in a bank account that pays a nominal rate of 1%, compounded monthly. You plan to make additional monthly deposits of $200, starting at the end of this month. How many payments will you have made when your account balance reaches $50,000?
Excel Hints | Example |
Interest rates (rates of return, etc.) are entered in decimal form | Enter 0.01 for 1% |
A formula or function always begins with = | =3/4 or =4*7 |
Use the ^ to raise a number to an exponent | (1.03)^5 or 71^365 |
To find the number of periods, use the function =nper( | =nper( |
To round up a number, use the function =roundup( . You may include another function inside of the roundup function. This is particularly useful for expressing the number of compounding (or discounting) periods. | =roundup(=nper( |
To find the periodic rate, use the function =rate( | =rate( |
To find the present value, use the function =pv( | =pv( |
To find the periodic payment, use the function =pmt( | =pmt( |
To find the future value, use the function =fv( | =fv( |
To sum a column or row, type =sum( and select information to be summed. The autosum feature is an alternative. | =sum( |
Use cell references whenever possible | If the number in cell B2 is 5, reference cell B2 by typing = and selecting cell B2, then hit enter |
To copy the contents of one cell, hover the cursor over the box in the lower right corner until the black crosshair appears. Left mouse click, hold, and drag. Control-C followed by Control-V also copies content. | |
To anchor a cell address, type $column$row | $D$5 anchors cell address D5 |
To anchor a column, but allow the row reference to change, type $columnrow | $D5 anchors column D, but not row 5 |
To anchor a row, but allow the column reference to change, type column$row | D$5 anchors row 5, but not column D |
Selecting a cell address and hitting the F4 function key on the keyboard will cycle through column/row anchors |
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