Solve the following problems and answer the last question. Example problems can be found on the “Example Single Cash Flow” tab below. Create an appropriate (TVM) formula using the supplied values in the appropriate cell so Excel can calculate the answer.
1. How much would be in your savings account in 11 years after depositing $150 today, if the bank pays 7% per year?
2. A deposit of $350 earns the following interest rates: (a) 8
% in the first year, (b) 6 in the second year, and (c) 5.5 in the third year. What would be the third year future value?
3. Compute the present value of an $850 payment made in 10 years when the discount rate is 12%.
4. What annual rate of return is earned on a $5,000 investment when it grows to $9,500 in five years?
5. What is the rate of interest if your money doubles every 6 years? This is also known as Rule of 72.
Question 6. Given the same annual interest rate, would you rather have a savings account that paid interest compounded on a monthly basis, or one that compounded interest on an annual basis? Perform the calculation to support your answer.
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