Assignment problem: Calculate the following using the appropriate functions in Excel
1. Maria has been offered a future payment of $750 two years from now. If she can earn an annual rate of 6.5%, compounded daily, on her investment, what should she pay for this investment today?
2. You invest $150 in a mutual fund today that pays 9% interest annually. How long will it take to double your money?
3. Infosys Technologies reported 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?
4. A couple plans to set aside $20,000 per year in a conservative portfolio projected to earn 7% a year.
If they make their first savings contribution one year from now, how much will they have at the end of 20 years?
5. Karl is saving for an Australian vacation in 3 years. He estimates he will need $5,000 to cover his airfare and expenses for a week. If he invests in a fund that is expected to earn an average annual return of 10.3% over the next 3 years, how much will he have to save at the end of every year to reach his goal?
6. At retirement, a client has two payment options: a 20-year annuity at €50,000 per year starting after one year or a lump sum of €500,000 today. If the client's required rate of return on retirement fund investments is 6% per year, which plan has the higher present value and by how much?
7. CelebNav had sales last year of $700,000, and the analysts are predicting strong future performance for the start-up, with sales growing 20% a year for the next 3 years. After that, the sales should grow 11% per year for 2 years, at which time the owners are planning on selling the company. What is the expected value of those cash flows at the end of 5 years?
8. Samir bought a Honda Civic for $17,345. He put down $6,000 and financed the rest through the dealer at an APR of 4.9% for 4 years. What is the effective annual interest rate (EAR) if the loan payments are made monthly (try using the EAR formula 1st, then use EFFECT)? What is his monthly payment? How much total interest will he pay on the loan if he does not pay off the loan early?
9. For liquidity purposes, a client keeps $100,000 in a bank account. The bank quotes an annual interest rate of 7%. The bank's service representative explains that this is the rate one would earn if one were to cash out rather than invest the interest payments. How much will your client have in his account at the end of one year, assuming no additions or withdrawals, using the following types of compounding?
a. Annually
b. Quarterly
c. Monthly
d. Daily
e. Continuous (use EXP)
10. A bank pays a stated annual interest rate of 8%. What is the effective annual rate using the following types of compounding? Use a One-Way Data Table to compare quarterly, monthly, and daily compounding.
a. Quarterly
b. Monthly
c. Continuous
11. A bank quotes a rate of 5.89% with an effective annual rate of 6.05%. Does the bank use annual, quarterly, or monthly compounding? Try formula 1st, then EFFECT, then SPIN and SOLVER.