Question

Suppose that you are planning to buy a boat in the future for $100,000 [cell B2] and you deposit a lump sum of $50,000 CAD [cell B1] that earns an average annually compounding rate of return of 6% per year [cell B3].

(a)	How long (in years) would it take [cell B5] until you accumulate the lump sum needed? Use the NPER function.

(b)	What is the correct formula (using 18 characters or less) that should be placed in cell B5? Note: There are to be NO numbers in the function call (apart from a 0 if appropriate), only cell references, or negative cell references where appropriate.

Answer 1

Number of years  until you accumulate the lump sum needed is calculated using NPER function in Excel as below ;

rate = 6%

pmt = 0 (annual deposit is zero)

pv = -50000 (Amount deposited today. This is entered with a negative sign because it is a cash outflow)

fv = 100000 (Amount required at end. This is entered with a positive sign because it is a cash inflow)

The cell references are given as appropriate.

NPER is calculated to 11.90 years