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alculate the following using the appropriate functions in
Excel.1

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.

EXCEL FORMULA: Note: As per ch