Question

1) Future Value – Periodic Compounding You just received an inheritance from a distant relative of $100,000. You decide to invest it in a CD for 5 years that has a 1.60% interest rate (APR), compounded monthly. a) Using the appropriate formula, what will be your ending balance at the end of 5 years? (Show all work, you can’t just use the TVM calculator) b) How much interest will you earn? (Show your work) c) Create a spreadsheet that gives starting balance, interest paid, ending balance for each period. (see video)

Answer 1

Part A)

Particulars	Amount
Present Value	$         100,000.00
Int Rate	0.1333%
Periods	60

Future Value = Present Value * ( 1 + r )^n

= $ 100000 ( 1 + 0.001333) ^ 60

= $ 100000 ( 1.001333 ^ 60)

= $ 100000 * 1.0832

= $ 108322.93

Part b)

Int = Future Value - Investment

= $ 108322.93 - $ 100000

= $ 8322.93

Part c)

Period	Opening Bal	Int	Closing Bal
1	$ 100,000.00	$ 133.33	$ 100,133.33
2	$ 100,133.33	$ 133.51	$ 100,266.84
3	$ 100,266.84	$ 133.69	$ 100,400.53
4	$ 100,400.53	$ 133.87	$ 100,534.40
5	$ 100,534.40	$ 134.05	$ 100,668.45
6	$ 100,668.45	$ 134.22	$ 100,802.67
7	$ 100,802.67	$ 134.40	$ 100,937.07
8	$ 100,937.07	$ 134.58	$ 101,071.66
9	$ 101,071.66	$ 134.76	$ 101,206.42
10	$ 101,206.42	$ 134.94	$ 101,341.36
11	$ 101,341.36	$ 135.12	$ 101,476.48
12	$ 101,476.48	$ 135.30	$ 101,611.79
13	$ 101,611.79	$ 135.48	$ 101,747.27
14	$ 101,747.27	$ 135.66	$ 101,882.93
15	$ 101,882.93	$ 135.84	$ 102,018.77
16	$ 102,018.77	$ 136.03	$ 102,154.80
17	$ 102,154.80	$ 136.21	$ 102,291.01
18	$ 102,291.01	$ 136.39	$ 102,427.39
19	$ 102,427.39	$ 136.57	$ 102,563.96
20	$ 102,563.96	$ 136.75	$ 102,700.72
21	$ 102,700.72	$ 136.93	$ 102,837.65
22	$ 102,837.65	$ 137.12	$ 102,974.77
23	$ 102,974.77	$ 137.30	$ 103,112.07
24	$ 103,112.07	$ 137.48	$ 103,249.55
25	$ 103,249.55	$ 137.67	$ 103,387.22
26	$ 103,387.22	$ 137.85	$ 103,525.07
27	$ 103,525.07	$ 138.03	$ 103,663.10
28	$ 103,663.10	$ 138.22	$ 103,801.32
29	$ 103,801.32	$ 138.40	$ 103,939.72
30	$ 103,939.72	$ 138.59	$ 104,078.30
31	$ 104,078.30	$ 138.77	$ 104,217.08
32	$ 104,217.08	$ 138.96	$ 104,356.03
33	$ 104,356.03	$ 139.14	$ 104,495.17
34	$ 104,495.17	$ 139.33	$ 104,634.50
35	$ 104,634.50	$ 139.51	$ 104,774.01
36	$ 104,774.01	$ 139.70	$ 104,913.71
37	$ 104,913.71	$ 139.88	$ 105,053.60
38	$ 105,053.60	$ 140.07	$ 105,193.67
39	$ 105,193.67	$ 140.26	$ 105,333.93
40	$ 105,333.93	$ 140.45	$ 105,474.37
41	$ 105,474.37	$ 140.63	$ 105,615.00
42	$ 105,615.00	$ 140.82	$ 105,755.82
43	$ 105,755.82	$ 141.01	$ 105,896.83
44	$ 105,896.83	$ 141.20	$ 106,038.03
45	$ 106,038.03	$ 141.38	$ 106,179.41
46	$ 106,179.41	$ 141.57	$ 106,320.98
47	$ 106,320.98	$ 141.76	$ 106,462.75
48	$ 106,462.75	$ 141.95	$ 106,604.70
49	$ 106,604.70	$ 142.14	$ 106,746.83
50	$ 106,746.83	$ 142.33	$ 106,889.16
51	$ 106,889.16	$ 142.52	$ 107,031.68
52	$ 107,031.68	$ 142.71	$ 107,174.39
53	$ 107,174.39	$ 142.90	$ 107,317.29
54	$ 107,317.29	$ 143.09	$ 107,460.38
55	$ 107,460.38	$ 143.28	$ 107,603.66
56	$ 107,603.66	$ 143.47	$ 107,747.13
57	$ 107,747.13	$ 143.66	$ 107,890.80
58	$ 107,890.80	$ 143.85	$ 108,034.65
59	$ 108,034.65	$ 144.05	$ 108,178.70
60	$ 108,178.70	$ 144.24	$ 108,322.93