Question

10)You have just retired with $1,000,000 in savings. This is the amount that you will be...

10)You have just retired with $1,000,000 in savings. This is the amount that you will be drawing down for the rest of your life. You expect to earn 6% and withdraw $70,000 per year. You also want to leave an inheritance of $100,000 to your favorite charity. How long can you rely on your savings? Assume that your first withdrawal will occur one year from today.

Use Excel’s =NPER(RATE,PMT,PV,[FV],[TYPE]) function.

RATE is 6%, PMT is $70,000, PV is $1,000,000, FV is $100,000, and TYPE is 0 since payments are made at the end of the period. If the [type] argument is omitted, it takes on the default value of 0.

A

B

C

D

E

1

Annual Rate

6%

2

Payments

$ 70,000

3

Present Value

- $ 1,000,000

4

Future Value

$100,000

6

5

6

Years

=NPER(B1,B2,B3,B4)

A

B

C

D

E

1

Annual Rate

6%

2

Payments

$ 70,000

3

Present Value

- $ 1,000,000

4

Future Value

$100,000

5

6

Years

a) You are offered an investment that will cost $975 and will pay you interest of $80 per year for the next 10 years. The investment will pay $1,000 at the end of the 10 years. What is the rate of return if you purchase this investment?

Use Excel’s =RATE(NPER,PMT,PV,[FV],[TYPE]) function.

NPER is 10, PMT is $80, PV is $975, FV is $1,000, and TYPE is 0 since payments are made at the end of the period. If the [type] argument is omitted, it takes on the default value of 0.

We use PV as a negative value to represent a cash outflow that results from money being invested. In that case, PMT and FV will be positive to represent cash inflows from the investment.

A

B

C

D

E

1

Years

10

2

Payments

$ 80

3

Present Value

- $ 975

4

Future Value

$ 1,000

5

6

Annual Rate

=RATE(B1,B2,B3,B4)

A

B

C

D

E

1

Years

10

2

Payments

$ 80

3

Present Value

- $ 975

4

Future Value

$ 1,000

5

6

Annual Rate

b) You are planning to send your daughter to college in 20 years. You estimate that you will need $100,000 at that time to pay for tuition, room, and board. How much money would you need to invest at the beginning of each year to achieve your goal assuming that you can earn a rate of return of 10% per year?

Use Excel’s =PMT(RATE,NPER,PV,[FV],[TYPE]) function.

7

RATE is 10%, NPER is 20, PV is $0, FV is $100,000, and TYPE is 1 since payments are made at the beginning of the period.

A

B

C

D

E

1

Annual Rate

10%

2

Years

20

3

Present Value

$0

4

Future Value

$ 100,000

5

Type

1

6

7

Payments

=PMT(B1,B2,B3,B4,B5)

A

B

C

D

E

1

Annual Rate

10%

2

Years

20

3

Present Value

$0

4

Future Value

$ 100,000

5

Type

1

6

7

Payments

Homework Answers

Answer #1
10)
RATE (I/Y) 6.00%
PV          (1,000,000.0)
PMT                   70,000.0
FV                100,000.0
N (Years) 31.86
a)
PMT 80.00
NPER 10
PV -975
FV 1000
RATE (I/Y) 8.38%
b)
RATE (I/Y) 10%
NPER 20
PV 0
FV 100000
PMT ($1,745.96)
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A bond has a face value of $1,000, a coupon rate of 8%, and a maturity...
A bond has a face value of $1,000, a coupon rate of 8%, and a maturity of 10 years.  The bond makes semi-annual coupon payments.  The bond’s yield to maturity is 9%.  In Excel, the =PV formula can be used to find the price of the bond.  Fill in the table with the appropriate values: RATE NPER PMT FV TYPE Repeat problem , but with annual coupon payments. RATE NPER PMT FV TYPE
The attached printout of an Excel spreadsheet shows the use of six financial formulas related to...
The attached printout of an Excel spreadsheet shows the use of six financial formulas related to the time-value-of-money concepts discussed in Chapter 5. Your task is to reproduce the spreadsheet using Excel financial formulas in the red cells, which have the names shown in blue in the adjacent cells. You can find the financial formulas in Excel by clicking on Formulas at the top of the spreadsheet, and then clicking on Financial. You will submit your spreadsheet through D2L, and...
I was looking at the solution to the following question on this site. I could not...
I was looking at the solution to the following question on this site. I could not understand why use 12 when working out the NPER. Since the monthly payments start 1 month after should you not use 11? Question 3. (a) A family member is thinking about funding his granddaughter’s university education in 8 years when she is expected to enrol at UWI, St. Augustine. He opens a special savings account, where he can receive a lump sum in 8...
What would be the future value of $15,555 invested now if it earns interest at 14.5...
What would be the future value of $15,555 invested now if it earns interest at 14.5 percent for seven years? Using a financial calculator, enter 15555 and press PV, enter 14.5 and press %i, and enter 7 and press N. Then, press CPT and FV which gives an answer of 40133.63 or $40,133.63. Using Excel, click financial wizard, then FV, enter 0.14 for rate, 7 for nper, 0 for pmt, 15,555 for PV, 0 for type. Press enter answer is...
A bond has a face value of $1,000, a coupon rate of 8%, and a maturity...
A bond has a face value of $1,000, a coupon rate of 8%, and a maturity of 10 years.  The bond makes semi-annual coupon payments.  The bond’s yield to maturity is 9%.  In Excel, the =PV formula can be used to find the price of the bond.  Fill in the table with the appropriate values: RATE NPER PMT FV TYPE
Please use Excel to answer the following TVM questions. You can use this spreadsheet to set...
Please use Excel to answer the following TVM questions. You can use this spreadsheet to set up your calculations if you so desire. Unless indicated otherwise, assume that all of the problems are ordinary annuities (payment made at the end of the period).        Part 4 I need $1,000,000 in 20 years if I am going to retire (Fat Chance!!) I currently have $100,000 saved for my retirement (I wish!!). A slick Wallstreet investment expert with the last name of Madoff...
Question 2 2a) Suppose a risk-free bond promises to pay $2,249.73 in 4 years.  If the going...
Question 2 2a) Suppose a risk-free bond promises to pay $2,249.73 in 4 years.  If the going risk-free interest rate is 3.5%, how much is the bond worth today?   Nper Rate PMT FV PV 2b) Suppose you can buy a U.S. Treasury bond which makes no payments until the bond matures 10 years from now, at which time it will pay you $1,000. What interest rate would you earn if you bought this bond for $585.43?   Nper PMT PV FV Rate...
Part 2: Present Value In this part, calculate the present values. Use the Excel PV function...
Part 2: Present Value In this part, calculate the present values. Use the Excel PV function to compute the present values. You are committed to owning a $200,000 home. If you believe your mutual fund can achieve an annual return of 10 percent, and you want to buy the home in 15 years, how much must you invest today? (7 Points) Calculate the present values in the table below using the PV Excel function. (7 Points) Future value Years Interest...
An ordinary annuity has a present value of $1,000,000. The annuity has monthly payments. The interest...
An ordinary annuity has a present value of $1,000,000. The annuity has monthly payments. The interest rate on the annuity is 10% APR. Which of the following represents the present value if this were an annuity due? a. $1,000,000 x 1.01 b. $1,000,000 / 1.10 c. $1,000,000 / 1.008333333 d. $1,000,000 x 1.008333333 e. $1,000,000 x 1.10 If you double the initial investment, then the future value will be more than doubled for a multi-period investment, everything else equat (Hint:...
Please use Excel to answer the following TVM questions. You can use this spreadsheet to set...
Please use Excel to answer the following TVM questions. You can use this spreadsheet to set up your calculations if you so desire. Unless indicated otherwise, assume that all of the problems are ordinary annuities (payment made at the end of the period).        Part 3 I am going to buy a car. I will finance the whole purchase (no down payment) with a new car loan that has a 6-year term. My monthly payments will be $392/mth and the annual...