Reference no: EM13210936

Find the future value =fv(rate,nper,pmt,[pv],type)

Find the present value =pv(rate,nper,pmt,[fv],type)

Payment =pmt(rate,nper,pv,[fv],type)

Number of periods =nper(rate,pmt,pv,[fv],type)

Yield (Interest rate) =rate(nper,pmt,pv,[fv],type)

There are five arguments in each function. Rate is the interest rate per period. For example, if the interest rate per period is 5%, you will type .05 for this argument. Nper is the total number of periods. Pv is the present value, and fv is the future value. Pmt is the dollar amount of the periodic payment. The "type" argument tells Excel whether the cash flows occur at the end (0) or beginning (1) of the period. The bracket ,"[ ]", means that you will input a negative value in order to return a positive value for the answer.

1. Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures?

a. $1,781.53

b. $1,870.61

c. $1,964.14

d. $2,062.34

e. $2,165.46

2. How much would $20,000 due in 50 years be worth today if the discount rate were 7.5%?

a. $438.03

b. $461.08

c. $485.35

d. $510.89

e. $537.78

3. Suppose the U.S. Treasury offers to sell you a bond for $747.25. No payments will be made until the bond matures 5 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond at the offer price?

a. 4.37%

b. 4.86%

c. 5.40%

d. 6.00%

e. 6.60%

4. Janice has $5,000 invested in a bank that pays 3.8% annually. How long will it take for her funds to triple?

a. 23.99

b. 25.26

c. 26.58

d. 27.98

e. 29.46

5. You want to buy a new ski boat 2 years from now, and you plan to save $8,200 per year, beginning one year from today. You will deposit your savings in an account that pays 6.2% interest. How much will you have just after you make the 2nd deposit, 2 years from now?

a. $15,260

b. $16,063

c. $16,908

d. $17,754

e. $18,642

6. You just inherited some money, and a broker offers to sell you an annuity that pays $5,000 at the end of each year for 20 years. You could earn 5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

a. $50,753

b. $53,424

c. $56,236

d. $59,195

e. $62,311

7. Suppose you inherited $275,000 and invested it at 8.25% per year. How much could you withdraw at the end of each of the next 20 years?

a. $28,532

b. $29,959

c. $31,457

d. $33,030

e. $34,681

8. What's the future value of $1,500 after 5 years if the appropriate interest rate is 6%, compounded semiannually?

a. $1,819

b. $1,915

c. $2,016

d. $2,117

e. $2,223