Time Value of Money
Budget: $10 – $30 USD
Use the attached case study to answer the questions in the second to last paragraph. Needs to be done in excel with each question in its own tab. Here are some notes on the questions.
1) Regarding the issue of the Canadian rate in Question 1, you can ignore this. If you would like to attempt incorporating this into the problem, please do; however, your grade will not be impacted either way.
2) For Question 4, you should be using the FV formula and follow Excel's prompts for inputs. Remember to adjust the inputs to the formula for monthly compounding. Once you have your answer, do a sanity check. The principle balance at year 2 should be less than the original amount borrowed, and the balances at 5 and 10 years should be successively lower as you pay off the loan. Please also be careful of your signs. Think about this as if you are the borrower: what components are cash inflows (-) and what are cash outflows (+)?
3) For Question 5, think about cash inflows and outflows at the point in time after 2, 5, and 10 years. Any future events need to be discounted back to the point in time you are doing your analysis at: 2, 5, and 10 years. The final step is to discount your net gain/loss back to time zero. Once you get yourself set up in 5a, you should be able to reuse for 5b, c, d.
1) Regarding the issue of the Canadian rate in Question 1, you can ignore this. If you would like to attempt incorporating this into the problem, please do; however, your grade will not be impacted either way.
2) For Question 4, you should be using the FV formula and follow Excel's prompts for inputs. Remember to adjust the inputs to the formula for monthly compounding. Once you have your answer, do a sanity check. The principle balance at year 2 should be less than the original amount borrowed, and the balances at 5 and 10 years should be successively lower as you pay off the loan. Please also be careful of your signs. Think about this as if you are the borrower: what components are cash inflows (-) and what are cash outflows (+)?
3) For Question 5, think about cash inflows and outflows at the point in time after 2, 5, and 10 years. Any future events need to be discounted back to the point in time you are doing your analysis at: 2, 5, and 10 years. The final step is to discount your net gain/loss back to time zero. Once you get yourself set up in 5a, you should be able to reuse for 5b, c, d.