(A) If you want to have $250 in 5 years and you can earn an annual return of 7%, how much must you invest today? Be sure to use cell references and make sure that your answer appears as a positive value. (B) If you make a one-time deposit today of $800 you can earn 10% per year, how much would you have in your account after 15 years? Be sure to use cell references and remember that deposits from you are outflows. (C) If your investment of $1,254 declined to $435 in 6 years, what compounded annual rate of return would you have earned? Be sure to use cell references and to convert your answer to a percent rounded to two places after the decimal point. (D) If you can earn 5% per year, precisely how many years would it take for your investment of $450 to turn into $1,200? Be sure to use cell references and display your answer rounded to two places after the decimal point. TIME VALUE OF MONEY: LUMP SUMS (A) (B) (C) (D) PV FV r n A 1 2 PROBLEM (5-10) 3 B C D E F G H J K 456700 8 You invest $800 at an annual rate of 8% for 12 years. How much more interest would you earn with 5 compound interest than with simple interest for (a) the whole 12 years; and (b) in just year 7 by itself? 9 10 COMPOUND VS. SIMPLE INTEREST ANNUAL RATE 11 AMOUNT TODAY 12 ENDING YEAR 13 SINGLE YEAR WITHIN FULL PERIOD 145) TOTAL INTEREST FOR FULL PERIOD 15 6) SIMPLE INTEREST FOR EACH AND EVERY YEAR 167) SIMPLE INTEREST FOR FULL PERIOD 178) 18 9) MORE COMPOUND INTEREST THAN SIMPLE FOR FULL PERIOD COMPOUND INTEREST FOR SINGLE YEAR WITHIN FULL PERIOD 19 10) MORE COMPOUND INTEREST THAN SIMPLE FOR SINGLE YEAR 20 20 21 22 23 24 25 26 27 28 222222