Chapter 3 section 3

Excel Companion Chapter 3 section 3
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Emulation of a Financial Calculator	*TVM1.xls*

Click on the tab for the sheet FinCalc in TVM1.xls. This worksheet emulates basic functions that are useful in solving lump sum problems as opposed to problems that involve periodic payments, i.e. single payment versus periodic payments. You supply three out of the four parameters and, like a financial calculator, FinCalc computes the unknown value. You should be aware of the fact that problems involving unknown interest rates or unknown times can also be solved with a standard scientific calculator using the keys for exponents and logarithms.

TVM1.xls - FinCalc

QUESTIONS:

1-5 Ann Uity is the Chief Financial Officer for Babson Designs LTD. Her husband, Lum Psum, is a freelance journalist. Ann and Lum do most of their personal banking at two local banks, bank A and bank B. Ann's company is a frequent customer of bank C. The advertised APR rates on savings accounts at these banks are:

Bank A:	4.75 % APR	compounded daily (360 day year)
Bank B:	5.00 % APR	compounded quarterly
Bank C:	4.90 % APR	compounded monthly

1.	Lum makes a deposit of $10,000. How much will he have at the end of 2 years and 90 days if:
	a) he selects bank A?
	b) he selects bank C?
2.	Lum is considering an investment in a mutual fund of growth stocks that he expects will have a minimum growth rate of 18% compounded annually. Under this assumption, how long will it take for his investment of $10,000 to grow to at least $20,000?
3.	Another mutual fund has doubled an investor's money over the past 6 years. What was the annual growth rate (to the nearest hundredth of a percent)?
4.	If Lum must be certain of having $10,000 in savings twenty months from now then what amount should he deposit now in:
	a) Bank B?
	b) Bank C?
	c) the stock market?
5.	Lum made a deposit of $1,000 into Bank A. One year later he moved all the money from this account into Bank B. If no other deposits are made then how much will he have in savings three years after the initial deposit?

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