1.67PM Wed Nov 6 Spreadsheet 2 copy K C Home Insert Draw Formulas Data Review Vie Calibri (Body) B I U EB A 7 11 fx A B C D E F Interest rate Monthly Deposit $275.00 Computed Amount Target Amount Amount of Time Monthly interest rate Differ ($19,186.76) 1 2 6% $20,000 60 months 0.005 $20,000 ($19,667.68) ($19,944.95) ($20,001.00) ($20,208.24) 3 7% $275.00 60 months 0.005833333 4 7.50% $275.00 $20,000 60 months 0.00625 $20,000 $20,000 7.61% $275.00 60 months 0.006341667 6 8% $275.00 60 months 0.003636364 7 8 9 10 11 12 13 14 15 16 17 18

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question
100%

     “Suppose that your parents are willing to lend you $20,000 for part of the cost of your college education and living expenses.  They want you to repay them the $20,000 without any interest, in a lump sum 15 years after you graduate, when they plan to retire and move.  Meanwhile, you will be busy repaying federally guaranteed loans for the first 10 years after graduation.  But you realize that you won’t be able to repay the lump sum without saving up.  So you decide that you will put aside money in an interest-bearing account every month for the first five years before the payment is due.  You feel comfortable with setting aside $275 a month (the amount of the payment on your college loans, which will be paid off after 10 years).

     How high an annual nominal rate on savings do you need to accumulate the $20,000, in 60 months, if interest is compounded monthly?  Enter into a spreadsheet the values of d = 275, r = 0.05 (annual rate), and n = 60, and the savings formula with r replaced by r/12 (the monthly interest rate).  You will find that the amount accumulated is not enough.  Change r to 0.09, it’s more than enough.  Try other values until you determine r to two decimal places.”

     I entered information in Excel spreadsheet and I am trying to see if I am doing it correctly.  I have never used Excel.

 

 

 

1.67PM Wed Nov 6
Spreadsheet 2 copy
K C
Home
Insert
Draw
Formulas
Data
Review
Vie
Calibri (Body)
B
I U
EB
A
7
11
fx
A
B
C
D
E
F
Interest rate Monthly Deposit
$275.00
Computed Amount Target Amount Amount of Time Monthly interest rate Differ
($19,186.76)
1
2
6%
$20,000
60 months
0.005
$20,000
($19,667.68)
($19,944.95)
($20,001.00)
($20,208.24)
3
7%
$275.00
60 months
0.005833333
4
7.50%
$275.00
$20,000
60 months
0.00625
$20,000
$20,000
7.61%
$275.00
60 months
0.006341667
6
8%
$275.00
60 months
0.003636364
7
8
9
10
11
12
13
14
15
16
17
18
Transcribed Image Text:1.67PM Wed Nov 6 Spreadsheet 2 copy K C Home Insert Draw Formulas Data Review Vie Calibri (Body) B I U EB A 7 11 fx A B C D E F Interest rate Monthly Deposit $275.00 Computed Amount Target Amount Amount of Time Monthly interest rate Differ ($19,186.76) 1 2 6% $20,000 60 months 0.005 $20,000 ($19,667.68) ($19,944.95) ($20,001.00) ($20,208.24) 3 7% $275.00 60 months 0.005833333 4 7.50% $275.00 $20,000 60 months 0.00625 $20,000 $20,000 7.61% $275.00 60 months 0.006341667 6 8% $275.00 60 months 0.003636364 7 8 9 10 11 12 13 14 15 16 17 18
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Annuity
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education