Use Excel Functions to correctly calculate answers to all problems belowExplain in words what you do to make each calculationExplain in words what the answers meanIn problems with an A and B part, explain what you learn from the differenceQuestion 1If you deposit $25,000 today in a Certificate of Deposit and earn 1.2% annual interest, how much will you have in 7 years?Question 2June received a life insurance payout from her grandmother in the form of an annuity. She will get $25,000 per year for the next 30 years. How much is that worth today if the current long term interest rate is 2.5%? This is an ordinary annuity.Question 3If Interest rates rise to 5%, what will be the value today of the annuity in 2? Explain whatQuestion 4Dionne expects to receive a graduation gift of $10,000 from her parents in 4 years. If the discount rate is 3.4%, what is the gift worth today?Question 5The Woods have $60,000 to use as a down-payment on a house, and they want to borrow $240,000 to buy a house for $300,000. The current annual mortgage interest rate is 3.75%. What will their monthly payment be for a 30 year loan that has equal monthly payments. They will owe zero at the end of the mortgage.Question 6Mrs. Woods sees an advertisement for a 15 year loan at a rate of 2.5%. What would be the mortgage payment if they borrow $240,000 at this lower interest rate? What are the advantages or disadvantages of this loan compared to the loan in 5 above?Question 7Vinod deposits $30,000 into an IRA account that invests in long term U S Treasury Bonds. Current Interest rates for the 20 year bond are 2.5%. How long will it take to double Vinod’s money?Question 8How long will it take Vinod to double his money at 7.5%?Question 9Kim retired after 30 years in 2016 from the Monsanto company. She had paid $400 per month into her 401K retirement plan. When she retired the balance in her account was $873,000. What average annual rate of interest had she earned over the 30 years, assuming monthly compounding?Question 10Kim’s niece, Janae just took a new job at Washington Adventist Hospital. She plans to contribute $600 per month to her IRA. The plan allows investment into a corporate bond fund that is currently earning 3.5% per year. How much should Janae expect to have when she retires in 30 years? Explain the difference with what Kim accumulated.Question 11For the year that ended in January 2000, Wal-Mart had revenues of $165 billion. For the year ended in January 2016, it had revenues of $482 billion. What has been the average compound growth rate?Question 12Bola has accumulated $30,000 in her thrift savings plan at her job at the Federal Aviation Administration as of May 2016. The government puts in 1% of her pay and matches up to another 4% if she puts in 5% out of her pay.Bola earns $90,000 a year and plans to add 5% from her income plus the agency 5% for a total of $9,000 per year.Her cousin Eugene says that if she invests in stocks, she can earn 12% per year because that has been the long term history. How much will she have in 25 years at retirement if she can earn 12% per year compounded annually? Assume annual compounding foe ease of calculation.Question 13Bola’s friend Marshall heard a speech by John C. (Jack) Bogle, founder of The Vanguard Group of Mutual Funds, one of the lowest cost and most successful group of funds. Jack said that with the increasing need to reduce carbon emissions, it is unlikely that long term stock returns can exceed 6% per year. Steps to reduce carbon will likely reduce prospects for economic growth in Mr. Bogle’s opinion. How much will Bola have if Jack Bogle is correct and the earnings will be 6% per year compounded annually? What does this tell about the effect of the rate on the amount of money accumulated for retirement? Note: Thrift savings may be invested in a number of choices including the G fund, a portfolio of U S Government Bonds that pays 1.75% as of May 2016.Question 14Christina hopes to open a Deli in 2016. The initial investment will be $75,000. She expects that the Deli will generate the positive cash flow as indicated below. If she can borrow money at 7% per year, what will be the Net Present Value? Use 7% as the discount rate.Question 15James and Corrine are considering what to do about purchasing a new car. They plan to acquire a new 2016 Toyota Highlander. The dealer has quotes a price of $40,000 with the options they want.They have choices: Lease, Buy with a zero interest loan from the dealer, and Buy with a $2,000 rebate and borrow the money from the credit union.A. Lease: With an initial payment of $3,300, due at signing, they can lease the car for 3 years at $324 per month. At the end they have the option to purchase the car for $30,000. The cost of tags and sale tax is covered by the dealer.B. Zero Interest: If they decide to buy, they have the option of a zero interest loan for 3 years.C. $2,000 Rebate: If the decide to take the rebate, the loan from the credit union has an annual rate of 6% for 5 years. In both cases, the cost of sales tax and license tags total $3,300. They plan to keep the car for 12 years. Which option has the lowest present value cost? They decided to use 6% as the discount rate.
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