Good Morning,

I am looking for someone to complete the last question on the attachment, question K. It has to do with Goal seek and I am missing some step so please explain the steps for completing so I understand how you got there.

thank you in advance.

GBA 7211 Introduction to Finance I Individual Graded Assignment a. Find the FV of $1,000 invested to earn 10% annually 5 years from now. Answer this question by using a math formula and also by using the Excel function wizard. Inputs: Formula: Wizard (FV): PV = I/YR = N = FV = PV(1+I)^N = 1000 10% 5 $ 1,610.51 $1,610.51 Note: When you use the wizard and fill in the menu items, the result is the formula you see on the formula line if you click on cell E12. Put the pointer on E12 and then click the function wizard (fx) to see the completed menu. Also, it is generally easiest to fill in the wizard menus by clicking on one of the menu slots to activate the cursor and then clicking on the cell where the item is given. Then, hit the tab key to move down to the next menu slot to continue filling out the dialog box. Experiment by changing the input values to see how quickly the output values change. b. Now create a table that shows the FV at 0%, 5%, and 20% for 0, 1, 2, 3, 4, and 5 years. Then create a graph with years on the horizontal axis and FV on the vertical axis to display your results. To create a table begin by typing in the row and column labels as shown below. We could fill in the table by inserting formulas in all the cells, but a better way is to use an Excel data table First set Cell B32 = E12. Then, we selected (highlighted) the range B32:E38, then clicked Data Table and filled in the menu items to complete the table. Note that the Row Input Cell is D9 and the Column Input Cell is D10. Years (D10): $1,610.51 0 1 2 3 4 5 Interest Rate (D9) 0% 5% 20% To create the graph, first select the range C33:E38. Then click the chart wizard. Then follow the menu. It is easy to make a chart, but a lot of detailed steps are involved to format it so that it's "pretty." Pretty charts are generally not necessary to get the picture, though. Note that as the last item in the chart menu you are asked if you want to put the chart on the $12.00 worksheet or on a separate tab. This is a matter of taste. We put the chart below on the spreadsheet so we could see how $10.00 changes in the data lead to changes in the graph. $8.00 Note that the inputs to the data table, hence to the graph, are now in the row and column heads. Change the 20% in Cell E32 to .3 (or 30%), then to .4, then to .5, etc., to see how the table and the chart changes. $6.00 $4.00 $2.00 $0.00 1 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 1 c. Find the PV of $1,000 due in 5 years if the discount rate is 10% per year. Again, work the problem with a formula and also by using the function wizard. Inputs: FV = I/YR = N = PV = FV/(1+I)^N = Formula: Wizard (PV): 1000 10% 5 $ 620.92 $620.92 Note: In the wizard's menu, use zero for Pmt because there are no periodic payments. Also, set the FV with a negative sign so that the PV will appear as a positive number. d. A security has a cost of $1,000 and will return $2,000 after 5 years. What rate of return does the security provide? Inputs: PV = FV = I/YR = N = Wizard (Rate): -1000 2000 ? 5 14.87% Note: Use zero for Pmt since there are no periodic payments. Note that the PV is given a negative sign because it is an outflow (cost to buy the security). Also, note that you must scroll down the menu to complete the inputs. e. Suppose California's population is 30 million people, and its population is expected to grow by 2% per year. How long would it take for the population to double? Inputs: PV = FV = I/YR = growth rate N = Wizard (NPER): -30 60 2% ? 35.00 = Years to double. f. Find the PV of an ordinary annuity that pays $1,000 at the end of each of the next 5 years if the interest rate is 15%. Then find the FV of that same annuity. Inputs: PMT = N= I/YR = $ 1,000 5 15% PV: Use function wizard (PV) PV = -$3,352.16 FV: Use function wizard (FV) FV = -$6,742.38 g. How would the PV and FV of the above annuity change if it were an annuity due rather than an ordinary annuity? For the PV, each payment would be received one period sooner, hence would be discounted back one less year. This would make the PV larger. We can find the PV of the annuity due by finding the PV of an ordinary annuity and then multiplying it by (1 + I). PV annuity due = -$3,352.16 x 115% = -$3,854.98 115% = -$7,753.74 Exactly the same adjustment is made to find the FV of the annuity due. FV annuity due = -$6,742.38 x h. What would the FV and the PV for parts a and c be if the interest rate were 10% with semiannual compounding rather than 10% with annual compounding? Part a. FV with semiannual compounding: Inputs: PV = I/YR = N = Formula: FV = PV(1+I)^N = Wizard (FV): Part c. PV with semiannual compounding: Inputs: Formula: Wizard (PV): FV = I/YR = N = PV = FV/(1+I)^N = $ $ Orig. Inputs 1000 10% 5 1,610.51 $ 1,610.51 $ New Inputs 1000 5% 10 1,628.89 1,628.89 $ $ Orig. Inputs 1000 10% 5 620.92 $ 620.92 $ New Inputs 1000 5% 10 613.91 613.91 i. Find the PV and FV of an investment that makes the following end-of-year payments. The interest rate is 8%. Year 1 2 3 Payment 100 200 400 Rate = 8% To find the PV, use the NPV function: PV = $581.59 Excel does not have a function for the sum of the future values for a set of uneven payments. Therefore, we must find this FV by some other method. Probably the easiest procedure is to simply compound each payment, then sum them, as is done below. Note that since the payments are received at the end of each year, the first payment is compounded for 2 years, the second for 1 year, and the third for 0 years. Year 1 2 3 Payment 100 200 400 x (1 + I )^(N-t) 1.17 1.08 1.00 = Sum = FV 116.64 216.00 400.00 $ 732.64 An alternative procedure for finding the FV would be to find the PV of the series using the NPV function, then compound that amount, as is done below: PV = FV of PV = $ $581.59 732.64 j. Suppose you bought a house and took out a mortgage for $50,000. The interest rate is 8%, and you must amortize the loan over 10 years with equal end-of-year payments. Set up an amortization schedule that shows the annual payments and the amount of each payment that repays the principal and the amount that constitutes interest expense to the borrower and interest income to the lender. Original amount of mortgage: Term of mortgage: Interest rate: Annual payment (use PMT function): 50000 10 0.08 -$7,451.47 Year 1 2 3 4 5 6 7 8 9 10 Beg. Amt. $50,000.00 $46,548.53 $42,820.93 $38,795.13 $34,447.27 $29,751.58 $24,680.23 $19,203.17 $13,287.95 $6,899.51 Pmt $7,451.47 $7,451.47 $7,451.47 $7,451.47 $7,451.47 $7,451.47 $7,451.47 $7,451.47 $7,451.47 $7,451.47 Interest $4,000.00 $3,723.88 $3,425.67 $3,103.61 $2,755.78 $2,380.13 $1,974.42 $1,536.25 $1,063.04 $551.96 Principal $3,451.47 $3,727.59 $4,025.80 $4,347.86 $4,695.69 $5,071.35 $5,477.06 $5,915.22 $6,388.44 $6,899.51 End. Bal. $46,548.53 $42,820.93 $38,795.13 $34,447.27 $29,751.58 $24,680.23 $19,203.17 $13,287.95 $6,899.51 $0.00 (1) Create a graph that shows how the payments are divided between interest and principal repayment over time. k. You just turned 55 (sorry) and are planning to retire in 10 years. You currently have $500,000 in your pension fund. Based on the longevity pattern of your family, you assume you will live 20 years past your retirement age; during each of those years you desire to withdraw $100,000 from your pension fund. If the interest rate is 5% annually, how much will you have to save annually for the next 10 years to meet your retirement goal. Assume that the first deposit to your pension fund will be today (annuity due), followed by nine more annual deposits; the annual withdrawals from age 65 will occur at the beginning of each year and after your 20th withdrawal your pension fund will have a zero balance. (1) solve the problem using the PV and Pmt wizzard using the template below. Pension savings today Annual desired pension payout Number of years until retirment Number of payout years after retirement Interest rate Present value today of all future retirement payments 500000 100000 10 20 0.05 $1,308,532 Annual payment needed to fund $37,411.43 (2) Use the following template and Goal Sek to find the answer Annual desired pension payout Annual Payment Interest rate Age 100000 -335544.32 0.05 Account Deposit or balance (withdrawal) Interest beginning of beginning of earned during Account balance end year year the year of year 55 500000 -335544.32 56 -335544.32 57 -335544.32 58 -335544.32 59 -335544.32 60 -335544.32 61 -335544.32 62 -335544.32 63 -335544.32 64 -335544.32 65 -100000 66 -100000 67 -100000 68 -100000 69 -100000 70 -100000 71 -100000 72 -100000 73 -100000 74 -100000 75 -100000 76 -100000 77 -100000 78 -100000 79 -100000 80 -100000 81 -100000 82 -100000 83 -100000 84 -100000 To get the dialog box, click on fx, then Financial, then FV, then OK. To get the data table dialog box, click on Data, then What if Analysis then Data Table FV CHART EXAMPLE $12.00 $10.00 Column C Column D Column E $8.00 $6.00 $4.00 $2.00 $0.00 1 2 3 4 5 6 $10.00 Column C Column D Column E $8.00 $6.00 $4.00 $2.00 $0.00 1 2 3 4 5 6 To get the dialog box click on Data, then What If Analysis, then Goal Seek