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 second 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 second 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 woman invests $50 a month for 40 years into an account earning 4.8% compounded monthly.
A. How much is in the account after 40 years?
B. How much interest will have been earned?
C. What is the annual percentage yield?
D. Prepare a table that shows the growth of the account balance through the first two months.
E. After you have finished finance lab 2, prepare a table that shows the growth of the account balance for all 40 years and create a line graph illustrating the growth of the account balance.
2. A woman wants to save up $18,000 to buy a new car in five years. She invests regularly into a savings account earning 5.4% compounded monthly.
A. What is the size of her monthly investment?
B. How much interest will she earn?
C. What is the annual percentage yield?
D. Prepare a table that shows the growth of the account balance through the first two months
E. After you have finished finance lab 2, prepare a table that shows the growth of the account balance for all 5years and create a line graph illustrating the growth of the account balance.
3. A couple invests $1,000 every six months for 30 years into a retirement account earning 4.7% compounded semiannually.
A. What is the future value of this investment?
B. How much total interest will they earn?
C. What is the annual percentage yield?
D. Prepare a table that shows the growth of the account balance through the first year.
E. After you have finished finance lab 2, prepare a table that shows the growth of the account balance for all 30 years and create a line graph illustrating the growth of the account balance.
4. A couple wants to save $500,000 for their retirement in 20 years. They make monthly payments into an account paying 6.6% compounded monthly.
A. What is the size of their monthly investment?
B. How much interest will they earn?
C. What is the annual percentage yield?
D. Prepare a table that shows the growth of the account balance through the first two months.
E. After you have finished finance lab 2, prepare a table that shows the growth of the account balance for all 20 years and create a line graph illustrating the growth of the account balance.
