FINANCE-End-of-Chapter Comprehensive/Spreadsheet Problem

05problem

11-10-15 17:04

Due on 10/22/2015

Chapter 5.
End-of-Chapter Comprehensive/Spreadsheet Problem

Problem 5-41

a. Find the FV of $1,000 invested to earn 10%
after 5 years. Answer this question by
using a

math formula and also by using the
Excel function wizard.

Inputs:
PV =
$1,000

I =
10%

N =
5

Formula:
FV = PV(1+I)^N =

Wizard (FV):

Note: When you use the wizard and fill in the
menu items, the result is the formula you see on the

formula
line if you put the pointer on cell E13.
Put the pointer on E13 and then click the function

wizard
(fx) to see the completed menu.
Finally, it is generally easiest to fill in the wizard menus by

clicking
on one of the menu slots to activate the cursor in that slot and then
clicking on the input cell

where
the item is given. Then, hit the tab
key to move down to the next menu slot.

Experiment by changing the input values
to see how quickly the output values change.

b. Now create a table that shows the FV at
0%, 5%, and 20% for 0, 1, 2, 3, 4, and 5 years. Then

create a graph with years on the
horizontal axis and FV on the vertical axis to display your results.

Begin
by typing in the row and column labels as shown below. We could fill in the
table by inserting

formulas
in all the cells, but a better way is to use an Excel data table as described
in 05model. We

used
the data table procedure. Note that
the Row Input Cell is D10 and the Column Input Cell is D11,

and
we set Cell B33 equal to Cell E12.
Then, we selected (highlighted) the range B33:E39, then

select
Data tab > What-If Analysis > Data Table, and filled in the menu items
to complete the table.

Years (D11)
Interest Rate (D10)

$ –
0%
5%
20%

0

1

2

3

4

5

To
create the graph, first select the range C34:E39. Then click Insert tab > Scatter. Then follow the

menu. It is easy to make a chart, but a lot of
detailed steps are involved to format it so that it’s

“pretty.” Pretty charts are generally not necessary
to get the picture, though.

We
put the chart right on the spreadsheet so we could see how changes

in
the data lead to changes in the graph.

Note
that the inputs to the data table, hence to the graph, are now in the row and
column heads. Change

the
20% in Cell E33 to 0.3 (or 30%), then to 0.4, then to 0.5, etc., to see how
the table and the chart

change.

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