Time Value of Money: Real World Savings Exercise:---For all calculations, state the exact source where you got the information (if it is a bank rate, for example, what bank? What web address?) ------> Please use navy federal credit union(website-navyfederal.org)

Please provide solution in excel and do not hardcode numbers.

Questions:

1. Suppose you open a regular savings account at Bank of America. Go to their website and look up the very small rate of interest you will receive on this account. Suppose you save $100 a month for five years. How much will you have at the end of 5 years?

2. If we look at putting your money into an account where you can earn a higher rate of return than what you would earn in a Bank of America regular savings account.

• What is your age today? Assume today is January 1. At the end of each year, starting December 31, 2021, you put $3,000 in an investment account earning 8% per year (compounded annually) and you continue making $5,000 contributions at the end of every year until you reach age 70. How much will you have in your retirement account?
• How much will you have in your account if you start your contributions at the end of 2022, instead of the end of 2021?

3. Go to the Visa or Mastercard website. If you get a credit card, what would your annual rate (APR) be?

a. Now, suppose that you buy that lavish home entertainment system that you always wanted for $5,000, and you charge this amount on your new credit card. Now, assume you pay for this purchase by making $100 payments per month to the credit card company. Develop an amortization table assuming $100 payments each month for the first year (12 monthly payments). To get credit for this question #3, part a., you must show all of your work. How much of the $100 is interest and how much is being used to pay down your debt during the first 12 months? (State the amount of interest and state the amount of debt principal repayment each month; then sum those amounts to show the total amount of interest and debt repayment during the first year.) Note that you do not need to do these calculations by hand - there are many websites that will calculate amortization tables and excel has an add-in feature to calculate this.

b. At a rate of $100 per month, how many months will it take to repay the entire $5,000?