• 
    

1. Find the SIMPLE interest that would be received on a $6,500 investment at 5.5% simple interest for 5 years, and show how much you would have (future value) at the end of the 10 years. (Show Work) 2. Calculate the future value of a $4,000 CD earning 5% interest for 5 years under the following scenarios (use a calculator for the algebraic formula answer, check using the FV function). (in Excel use =FV(i,n,0,(PV),0). Make PV negative because it is a cash out-flow. (Use the EXP function for the continuous compounding problem.) Algebraic Formula Answer A. Compounded yearly: B. Compounded twice a year C. Compounded quarterly: D. Compounded monthly E. Compounded continuously 3. A. B. C. Find the present value of $15,000 you expect to receive 20 years from now using an annual discount rate of 5.8%. (use a calculator for the algebraic formula answer, check using the =PV function). Show Work Discounted yearly: Discounted quarterly: Discounted monthly: Spreadsheet Formula Answer Spreadsheet fn 4. Assume you just inherited $5,000 from a deceased relative and you choose to invest it to start saving for the down payment on a pickup you plan to purchase 3 years from now. You are considering the following choices: A local bank is offering a certificate paying 2.95% compounded quarterly; and a reputable investment firm is offering a certificate paying 2.92% compounded monthly. Ignoring for now taxes and other special considerations, carefully evaluate your opportunities. Choose an investment and defend your choice. (solve each using algebra formulas, then check with spreadsheet function and include in the spreadsheet you submit for this assignment.) Bank: Investment firm: Your Conclusion: 5. A shark tank venture capitalist offers to loan you $100,000 today to purchase facilities for your new business idea, if you will promise to pay her back $245,000 in a lump sum 10 years from now. What annual interest rate is she using? Show algebraic work and also solve using the appropriate finance function. (hint, in Excel you will need to carry the answer out to at least a couple places past the decimal, or it will round it too much) 6. How many years will it take $10,000.00 to turn into $80,000.00 at a rate of 10% per you year (annual compounding)? Use the rule of 72 to approximate, then confirm that are close using the appropriate algebraic or Excel finance function.