Ch3

I'm having problems with this assignment. I was able to do some of the problems, I just need help to put it all into EXCEL because it must be completed in Excel.I'm suppose to use either the built-in functionality of Excel or simple math, which is easier to perform in Excel but need help.

1. A saver places $1,000 in a certification of deposit that matures after 20yrs and that each year pays 4 percent interest, which is compounded annually until the certificate matures.

a) How much interest will the saver earn if the interest is left to accumulate? b) How much interest will the saver earn if the interest is withdrawn each year? c) Why are the answers to (a) and (b) different?

Answers: a) $1,191 total interest b) $40 annually; $800 total

2. At the end of each year a self-employed person deposits $1,500 in a retirement account that earns 7 percent annually. a) How much will be in the account when the individual retires at the age of 65 if the contributions start when the person is 45 years old? b) How much additional money will be in the account if the individual stops making the contribution at age 65 but defers retirement until age 70? c) How much additional money will be in the account if the individual continues making the contribution but defers retirement until age 70? d) Compare the answers to (b) and (c). What is the effect of continuing the contributions? How much is the difference between the two answers?

Answers: a) $61,493 c) $94,874; $33,382 in additional funds

3. A saver wants $100,000 after ten years and believes that it is possible to earn an annual rate of 8 percent on invested funds. a) What amount must be invested each year to accumulate $100,000 if (1) the payments are made at the beginning of each year or (2) they are made at the end of each year? b) How much must be invested annually if the expected yield is only 5 percent?

Answers: a) Ordinary annuity: $6,903 Annuity due: $6,391 b) Ordinary annuity: $7,950 Annuity due: $7,572

23. Which is the better choice when purchasing a $30,000 car: a) a four-year loan at 6 percent, b) an immediate rebate of $2,000 and a four-year loan at 8 percent?

Answer: The $28,000 loan payment 5 $8,454

Chapter 5:

3. You are given the following information concerning two stocks: A B Expected return 10% 14% Standard deviation of the expected return 3.0 5.0 Correlation coefficient of the returns 2.1 a) What is the expected return on a portfolio consisting of 40 percent in stock A and 60 percent in stock B? b) What is the standard deviation of this portfolio?

Answers: a) 12.4% standard deviation 5 3.12

5. What is the beta of a portfolio consisting of one share of each of the following stocks, given their respective prices and beta coefficients? Stock Price Beta A $10 1.4 B 24 0.8 C 41 1.3 D 19 1.8 How would the portfolio beta differ if (a) the investor purchased 200 shares of stocks B and C for every 100 shares of A and D and (b) equal dollar amounts were invested in each stock?