Purpose of Assignment The purpose of this assignment is to provide students an opportunity to practice and learn the time-value of money concepts covered during Week 4. Students will understand how to evaluate future values, present values, interest rates, and time periods for financial investments.Assignment StepsResources: Quantitative Techniques in Financial Valuation Problem Set Excel® TemplateSave the Quantitative Techniques in Financial Valuation Problem Set Excel® Template to your computer.Read the instructions on the first tab.Complete the twelve exercises located in the template and record your answers in the highlighted spaces.
qrb501_r10_quantitative_techniques_in_financial_valuation_problem_set_excel_template__1_.xlsx
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Instructions:
Week 5 Individual Assignment
Total Number of Questions – 12
Total Points: 6
1. You have twelve problems – on each tab of this Excel file.
2. Please show your work in the cells. Use Excel formulas instead of writing the values/answers directly in the cell.
The instructor will then know where you made a mistake and provide you valuable feedback and partial credit (if appropria
back and partial credit (if appropriate).
Find the interest paid on a loan of $1,200 for three years at a simple interest rate of 5% per year.
How much money will you pay after three years?
Principal
Rate
Time
Simple Interest (SI)
Maturity Value
=PRODUCT(B4:B6)
=Principal + SI
Find the maturity value of a loan of $1,750 for 28 months at 9.8% simple interest per year.
Principal
Rate
Time
Simple Interest (SI)
Maturity Value
— Please make sure that the time periods for Time and Rate match.
=PRODUCT(B3:B5)
=Principal + SI
Find the simple interest rate of a loan of $5,000 that is made for three years and requires $1,762.50 in interest.
Principal
Time
SI
Rate
762.50 in interest.
A loan of $16,840 is borrowed at 9% simple interest and is
repaid with $4,167.90 interest. What is the duration of the loan?
Principal
Rate
SI
Time
How much money is borrowed if the interest rate is 9.25% simple interest
and the loan is made for 3.5 years and has $904.88 interest?
SI
Rate
Time
Principal
Find the ordinary and exact interest for a loan of $1000 at a 5% annual
interest rate. The loan was made on March 15 and is due May 15.
Loan date
Loan Due Date
Exact time
days
=B5-B4
Principal
Rate
Time
Loan date
Loan Due Date
Exact time
days
Principal
Rate
Time
Ordinary Simple Interest (SI)
Exact Simple Interest (SI)
=PRODUCT(B8:B10)
=PRODUCT(G8:G10)
=G5-G4
=PRODUCT(G8:G10)
Find the bank discount and proceeds using ordinary interest for a loan to Michelle Anders for $7,200
at 8.25% annual simple interest from August 8 to November 8.
Loan date
Loan Due Date
Exact time
days
Face Value (F)
Discount Rate (D)
Time Period (T)
Bank Discount (B)
years –> ‘Convert Exact time in days to years
=PRODUCT(B8:B10) OR =B8*B9*B10
Proceeds (P)
=B8-B11
=B5-B4
What is the effective interest rate of a simple discount note for $8,000,
at an ordinary bank discount rate of 11%, for 120 days?
Face Value (F)
Discount Rate (D)
Time Period (T)
Bank Discount (B)
years –> ‘Convert Exact time in days to years
=PRODUCT(B4:B6) OR =B4*B5*B6
Proceeds (P)
=B4 – B7
Rate
=B7/PRODUCT(B9, B6)
SOLVED EXAMPLE
What is the effective interest rate for the first year for a loan of $20,000
for three years if the interest is compounded quarterly at a rate of 12%?
Quoted Rate
12.00% quarterly
No. of compounding
periods per year
EAR
4 For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo
12.55% =EFFECT(B5, B6)
1. Ross Land has a loan of $8,500 compounded quarterly for four years at 6%. What is the effective interest rate for the first y
Quoted Rate
No. of compounding
periods per year
EAR
For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo
=EFFECT(B11, B12)
2. Find the effective interest rate for the first year for a loan for four years compounded semiannually at an annual rate of 2%
Quoted Rate
No. of compounding
periods per year
EAR
For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo
=EFFECT(B19, B20)
3. What is the effective interest rate for the first year for a loan of $5,000 at 10% compounded daily for three years?
Quoted Rate
No. of compounding
periods per year
EAR
For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo
=EFFECT(B23, B24)
4. Depending on the issuer, a typical credit card agreement quotes an interest rate of 18 percent APR. Monthly payments are
What is the actual interest rate you pay on such a credit card?
Quoted Rate
No. of compounding
periods per year
EAR
For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo
=EFFECT(B30, B31)
5. Find the effective interest rate for a loan of $3,500 at 10% interest compounded quarterly.
Quoted Rate
No. of compounding
periods per year
EAR
For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo
=EFFECT(B36, B37)
SOLVED EXAMPLE
Tim Bowling has $20,000 invested for three years at a 5.25% annual rate compounded daily.
How much interest will he earn?
Initial Investment (PV)
Quoted Rate
Compounding Frequency
Number of compoundings (m)
Quoted Rate divided by m = RATE
Number of Years
NPER (Num. of years * m)
Ending Amount (FV)
Compound Interest
$20,000
5.25%
Daily
365
0.0144%
3
1095
$23,411.35
$3,411.35
Choose one
For Quarterly, type 4; for semiannually, type 2; for a
Exercise
Find the future value of a $15,000 money market investment at 2.8% annual interest compounded daily for three years.
Initial Investment (PV)
Quoted Rate
Compounding Frequency
Number of compoundings (m)
Quoted Rate divided by m = RATE
Number of Years
NPER (Num. of years * m)
Ending Amount (FV)
Compound Interest
Choose one
For Quarterly, type 4; for semiannually, type 2; for a
for semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365
for semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365
SOLVED EXAMPLE
The Holiday Boutique would like to put away some of the holiday
profits to save for a planned expansion. A total of $8,000 is needed in three years. How much
money in a 5.2% three-year certificate of deposit that is compounded monthly must be invested
now to have the $8,000 in three years?
Future Value Needed (FV)
Quoted Rate
Compounding Frequency
Number of compoundings (m)
Quoted Rate divided by m = RATE
Number of Years
NPER (Num. of years * m)
Amount Invested Now (PV)
$8,000
5.2%
Monthly
12
0.4333%
3
36
$6,846.78
Choose one
For Quarterly, type 4; for semiannually, type 2; for a
Exercise
How much should be invested now to have $15,000 in six years if interest is 4% compounded quarterly?
Future Value Needed (FV)
Quoted Rate
Compounding Frequency
Number of compoundings (m)
Quoted Rate divided by m = RATE
Number of Years
NPER (Num. of years * m)
Amount Invested Now (PV)
Choose one
For Quarterly, type 4; for semiannually, type 2; for a
r semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365
r semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365
Jamie Juarez needs $12,000 in 10 years for her daughter’s college education.
How much must be invested today at 2% annual interest compounded
semiannually to have the needed funds?
Future Value Needed (FV)
Quoted Rate
Compounding Frequency
Number of compoundings (m)
Quoted Rate divided by m = RATE
Number of Years
NPER (Num. of years * m)
Amount Invested Now (PV)
Choose one
For Quarterly, type 4; for semiannually, type 2; for annually, ty
A loan of $8,000 for two acres of woodland is compounded quarterly at an annual
rate of 6% for five years. Find the compound amount and the compound interest.
Initial Investment (PV)
Quoted Rate
Compounding Frequency
Number of compoundings (m)
Quoted Rate divided by m = RATE
Number of Years
NPER (Num. of years * m)
Ending Amount (FV)
Compound Interest
Choose one
For Quarterly, type 4; for semiannually, type 2; for annually, ty
ually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365
ually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365
…
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