### YOU NEED TO KNOW

How to create and explain a graph using EXCEL.

To know how to use the financial formulas **FV**, PV, RATE, NPER, PMT, SUM

To know all the information that is include in the EXCEL NOTES and how to use it.

To know how the future value formula is derived and provide an explanation of every part of that process in plain English.

To utilize the future value formula in order to derive the formula for – the present value, – the rate and – the number of periods.

To know how to work with excel like those that are in pages 33, 34, 35, 38, 43, 44, 45, 49

To be able to make a graph like those on pages 37, 38 and 45 as your instructor made them in the class indicating the flow of money and its direction. You need to be able to relate the graphs with the excel sheets.

## FNB 100 0901 TEST #1

Provide every question in a separate sheet of your Excel file, naming it appropriate as Q1, Q2, etc.

### Question 1

Find the return rate than one needs in order to quadruple $5,000 in five years using the EXCEL function and verify this answer with your mathematical derivation. Provide the rate formatted with 3 decimal points

If instead of making a single deposit the same person deposits five payments of $2,150 in order to make the same amount as in the previous case, what is this return rate? Use the EXCEL formula only.

The WI section should explain the derivation in plain English step by step in the word document – use equation editor writing your mathematics. Also explain in plain English the difference between the two cases.

### Question 2

Discuss the meaning of this mathematical expression and verify it using EXCEL i.e. a) Explain what is the meaning of the ratio b) Explain what is the meaning of the term (1+r) and c) why the term (1+r) it is raised to the forth power i.e. it is multiplied to itself four times. d) Furthermore explain why there is a balance, i.e. the two terms are equal

NOTE – non WI sections should provide the written explanation in there Excel sheet, while the WI section in the Word document.

### Question 3

If you have a deposit of $10,000 for two years with a return rate of three percentage points and another deposit of $9,000 for four years with a return rate of five percentage points. a) calculate the future expected values of these deposits – annually, – all at once using the Excel Formula and your own formula. b) graph the annual calculations, and c) discuss the situation you face indicating what is happening, what is your preference and why.

### Question 4

If you deposit $5.000 a year with a return rate of 3% and you like to accumulate $50,000. How many periods you need to make this deposit and what would be the difference if the deposit is at the beginning or the end of the period?

### Question 5

If you deposit $5.000 a year with a return rate of 3% for eight years, how much is the value that future monetary flows today? What would be the difference if the money were deposited at the beginning or the end of the year? Calculate your answer with all possible ways you know. The WI section provide a graph and explain it.