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In: Finance

Work all the problems with a calculator (or spreadsheet) using the algebra equations and confirm your...

Work all the problems with a calculator (or spreadsheet) using the algebra equations and confirm your answer using the finance function available in your spreadsheet. The answers from both methods should be equal (within a small rounding error). Show what Algebraic Formula you use.

1. Find the present value of $125,000 you expect to receive 15 years from now using a discount rate of 7%. Write out the formula and use the power key, check with the Excel finance functions.

    Show Work                             Formula Answer         Spreadsheet fn

A.        Discounted yearly:    _______              _______

B.        Discounted quarterly:                                              _______            _______

C.        Discounted monthly:                                               _______             _______

Solutions

Expert Solution

a.

Present Value if discounted yearly = 125,000/(1 + 0.07)15 = $45,305.75

b.

Present Value if discounted quarterly = 125,000/(1 + 0.07/4)60 = $44,141.28

c.

Present Value if discounted monthly = 125,000/(1 + 0.07/12)180 = $43,875.86

jeff jeffy answered 2 years ago
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