The best way to study is to attempt to do these exercises on your own before looking at the answers. If you are working through these exercises before completing the first finance lab, use a calculator to find the answers to A, B, and C and when you get to part D, prepare only the first three lines of the table (through period 2). After completing the first finance lab, come back and redo the exercises using Excel.
Before working on these problems, you might want to read the section on how to use a calculator.
1. A man invests $3000 for 5 years at 4.2% compounded monthly.
A. How much will be in the account at the end of the term?
B. How much interest will be earned?
C. What is the annual percentage yield?
D. Prepare a table that shows the growth of the investment.
E. Create a line graph illustrating the growth of the investment.
2. A woman invests $5,000 in a 18-month CD (Certificate of Deposit) paying 5.2% compounded quarterly.
A. What is the future value of the CD?
B. How much interest will be earned?
C. What is the annual percentage yield?
D. Prepare a table that shows the growth of the investment.
E. Create a line graph illustrating the growth of the investment.
3. A $500 savings bond pays 6.5% compounded semiannually and matures in 7.5 years.
A. What is the purchase price?
B. How much interest will be earned?
C. What is the annual percentage yield?
D. Prepare a table that shows the growth of the investment.
E. Create a line graph illustrating the growth of the investment.
4. A couple decides to invest some money in an account for use during retirement. Their goal is to have $100,000 in 40 years. The account pays 5.5% compounded monthly.
A. How much do they need to invest to meet their goal?
B. How much interest will they earn?
C. What is the annual percentage yield?
D. Prepare a table that shows the growth of the investment.
E. Create a line graph illustrating the growth of the investment.
