Solve the following financial problems using the time value of money functions in Excel (PV, FV, PMT, NPER, RATE, EFFECT) OR using your financial
calculator.
Assume you deposit $3,000 today, and $300 at the end of each year, in an account earning 4% per year for 20 years. What is the future value?
General Electric has an unfunded pension liability of $300 million that must be paid in 15 years. The CFO deposits $10 million in account today to help meet
this goal, and will also deposit $8 million at the end of the next 15 years, to meet this liability. What annual rate of interest must the account earn to meet the
liability?
What is the present value of an ordinary annuity that promises $20,000 per year for 20 years if the appropriate discount rate is 5%?
What is the present value of an annuity due that promises $20,000 per year for 20 years if the appropriate discount rate is 5%?
What is the future value of an ordinary annuity that promises $60,000 per year for 10 years if the appropriate interest rate is 4%?
What is the future value of an annuity due that promises $60,000 per year for 10 years if the appropriate interest rate is 4%?
You recently received a credit card that quotes an annual percentage rate (APR) of 24%. The card requires monthly payments. What is the effective annual
rate (EAR)?
Page 187, #2c, Page 188, #5a,b,c and #6 (apply to #5)
Note: Be sure to go through the Supplemental Readings “Practice Problems and Solutions”
M3_Practice_Problems_and_Solutions_using_Calculator.pdf
M3_Practice_Problems_Solutions_using_Excel.xlsx
before answering these questions. For example, you need the answer to Page 187, #1 in order to solve #2c.
Read page 165-167 about loan amortization. I uploaded a file called “M3_Loan_Amoritization_Sheet”. Use that sheet to answer the following questions from
the book:
Page 180, number 8
Page 185, number 41
Notice that the excel sheet has three tabs: the main one, and then sheets for the two problems. Solve the two problems in the appropriate sheets.
“p180num8” means page 180, number 8.
Note: In both questions, you will be solving for principal payment per period, so leave that blank. The payment will pop up in column C.
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