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# You want to buy a \$300,000 house.

You plan to make a down payment of 20% of the purchase price and finance the rest wit loan. The loan is fully amortizing, and requires monthly payments at the end of each month. The nominal loan rate is 5%, co much of the purchase price will you finance with the mortgage loan? 2) What is your anticipated monthly mortgage paymen Answer 1) Loan amount 2) Monthly payment Answer N I PV PMT FV 360 0.004166667 \$240,000.00 (\$1,288.37) Use the appropriate formulas and Excel function to solve the problem (typed-in solutions receive 0 credit) \$240,000

rice and finance the rest with a 30-year fixed rate mortgage e nominal loan rate is 5%, compounded monthly. 1) How monthly mortgage payment?

Suppose that you deposit \$200 at the end of each month into an account paying an expected annual rate of return of 3%, compounded monthly. How much money will you have in the account in 10 years? Answer N I PV PMT FV 120 0.0025 (\$200.00) \$27,948.28 Use the appropriate formulas and Excel 10 function to solve the problem (typed-in 0.03 solutions receive 0 credit) (\$200.00) \$27,948.28 This side is done with adjustments in the FV equation for monthly compounding

## ed annual rate of return of 3%,

hly compounding

Today is Dec. 31, 2012. You have been saving money each month over the past year, and have just made your last deposit in of 0.2% per year, compounded monthly. You did not have a set amount that you saved each month, instead, you saved any e month. Your savings history is given below in chronological order. Assume that you started the year with \$0 in savings, and d each month into a checking account beginning on Jan. 31, 2012. 1) What is the value of your total savings today? 2) What is you have earned over the year? (Hint: today is time 0) Use the appropriate formulas and Excel function to solve the problem (typed-in solutions receive 0 credit) Savings Period Cash Flow FV 21.32 0 0.00 0.00 116.13 1 (21.32) 21.71 3.48 2 (116.13) 118.08 463.15 3 (3.48) 3.53 51.06 4 (463.15) 469.36 129.09 5 (51.06) 51.66 388.07 6 (129.09) 130.39 340.14 7 (388.07) 391.31 404.74 8 (340.14) 342.42 362.44 9 (404.74) 406.77 43.44 10 (362.44) 363.65 67.00 11 (43.44) 43.51 (67.00) 67.00 12 Total 2,390.06 2,409.39

Year 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012

Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

t year, and have just made your last deposit into a bank account that pays interest ou saved each month, instead, you saved any extra income that you had for the t you started the year with \$0 in savings, and deposited your savings at the end of e value of your total savings today? 2) What is the dollar amount of interest that

## 1) Total account value 2) Total dollar amount of interest earned

An investment offers to pay you \$300 per quarter for 10 years. If the annual rate is 11% with quarterly compounding, then what is the present value of these cash flows? Answer N I PV PMT FV 40 0.0275 (\$7,223.43) \$300.00 Use the appropriate formulas and Excel function to solve the problem (typed-in solutions receive 0 credit)

quarterly

You currently have \$4,000 in a bank account that pays a nominal rate of 1%, compounded monthly. You plan to make additional monthly deposits of \$200, starting at the end of this month. How many payments will you have made when your account balance reaches \$50,000? Answer 207.34 0.00083333 -\$4,000.00 (\$200.00) \$50,000.00

N I PV PMT FV

208.00 Use the appropriate formulas and Excel function to solve the problem (typed-in solutions receive 0 credit).

## nthly. You plan to ments will you have

A basketball player is offered the following contract today, Jan. 1, 2012: \$2 million immediately, \$2.40 million in 2012, \$2.90 2014, and \$3.80 million in 2015. Assume all payments other than the first \$2 million are paid at the end of the year. If the app percent per year, what is the present value of the deal? Discount Rate 10% Period 0 1 2 3 4 Present Value of year end cash flows Present Value of everything (including initial) Cash Flow (millions) \$2.00 \$2.40 \$2.90 \$3.60 \$3.80 \$9.88 \$11.88

40 million in 2012, \$2.90 million in 2013, \$3.60 million in end of the year. If the appropriate discount rate is 10

Suppose you plan to save \$1,000 at the end of each year for a total of 10 years. You are considering four different mutual fun an average annual return of 2%, Fund 2 has an average annual return of 5%, Fund 3 has an annual average return of 10%, and average annual return of 15%. Assume annual compounding. For each year, calculate your total account value. Graph your r sure that your graph includes a legend, axis titles, and a chart title. (Hint: Year 10 FVs in the Answer area should match the on problem.) Fund N I/YR PV PMT FV 1 2 10 10 0.02 0.05 0 0 -1000 -1000 \$10,950 \$12,578 3 10 0.1 0 -1000 \$15,937 4 10 0.15 0 -1000 \$20,304

## Your graph should look like this examp

\$25,000

Year 0 1 2 3 4 5 6 7 8 9 10

1 2% \$0 \$1,000 \$2,020 \$3,060 \$4,122 \$5,204 \$6,308 \$7,434 \$8,583 \$9,755 \$10,950

Answer 2 3 5% 10% \$0 \$0 \$1,000 \$1,000 \$2,050 \$2,100 \$3,153 \$3,310 \$4,310 \$4,641 \$5,526 \$6,105 \$6,802 \$7,716 \$8,142 \$9,487 \$9,549 \$11,436 \$11,027 \$13,579 \$12,578 \$15,937

4 15% \$0 \$1,000 \$2,150 \$3,473 \$4,993 \$6,742 \$8,754 \$11,067 \$13,727 \$16,786 \$20,304

\$20,000

Savings Values

\$15,000

\$10,000

\$5,000

\$0 0

ng four different mutual funds: Fund 1 has average return of 10%, and Fund 4 has an account value. Graph your results. Make r area should match the ones given in the

Use the appropriate formulas and Excel function to solve the problem (typed-in solutions receive 0 credit)

should look like this example. Move this example to another location in the worksheet and create your own graph.

2% 5% 10% 15%

6 Years

10

12

2% 5% 10% 15%