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Homework answers / question archive / 1) Suppose that you are planning to buy a boat in 27 years [to be entered into cell B2] for an amount of $100,000 [cell B1] at that time, and you earn an average annually compounding rate of return of 12% per year [to be entered into cell B3]

1) Suppose that you are planning to buy a boat in 27 years [to be entered into cell B2] for an amount of $100,000 [cell B1] at that time, and you earn an average annually compounding rate of return of 12% per year [to be entered into cell B3]

Finance

1)

Suppose that you are planning to buy a boat in 27 years [to be entered into cell B2] for an amount of $100,000 [cell B1] at that time, and you earn an average annually compounding rate of return of 12% per year [to be entered into cell B3].

 
(a) How much money would you need to invest today as a lump sum to achieve your goal [cell B5]? There are no additional deposits or payments. Use the PV function.
(b) What is the correct formula (using 16 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.
Additional Note: For some reason, in the PV function, the f.v. represents an amount that is being paid out, not received. So the present value of something being paid out is a negative number. The correct answer to this question is the use of the PV function that returns the correct positive value.

2) 

Suppose that you are planning to buy a boat in the future for $100,000 [cell B2] and you deposit a lump sum of $60,000 CAD [cell B1] that earns an average annually compounding rate of return of 13% 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.

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