Financial Valuation (Time-Value of Money)

Purpose of Assignment (NO APA just Excel required)

The purpose of this assignment is to provide students an opportunity to apply the concepts of time value of money . 

Assignment Steps

Resources: Financial Valuation (Time-Value of Money) Cases Excel® Example

Read the instructions .

Complete the 2 cases located in the template.

Question

1

Barry learned in an online investment course that he should start investing as soon

as possible. He had always thought that it would be smart to start investing after he

finishes college and when his salary is high enough to pay the bills and to have money

left over. He projects that will be 5–10 years from now. Barry wants to compare the

difference between investing now and investing later. A financial advisor who spoke

to Barry suggested that a Roth IRA (Individual Retirement Account) would be a good

investment for him to start.

1. If Barry purchases a $2,000 Roth IRA when he is 25 years old and expects to

earn an average of 6% per year compounded annually over 35 years (until he is

60), how much will accumulate in the investment?

Initial Investment (PV)

Quoted Rate

Compounding Frequency

Choose one

Number of compoundings (m)

For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365

Quoted Rate divided by m = RATE

Number of Years

NPER (Num. of years * m)

Ending Amount (FV)

Question 2

Initial Investment (PV)
Quoted Rate

Compounding Frequency Semiannually Daily Choose one
Number of compoundings (m) For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365

Quoted Rate divided by m = RATE

Number of Years 1 1

NPER (Num. of years * m)
Ending Amount (FV)

At 45 years of age, Seth figured he wanted to work only 10 more years. Being a full-time landlord had a lot
of advantages: cash flow, free time, being his own boss—but it was time to start thinking toward retirement.
The real estate investments that he had made over the last 15 years had paid off handsomely. After selling a
duplex and paying the associated taxes, Seth had $350,000 in the bank and was debt-free. With only 10 years
before retirement, Seth wanted to make solid financial decisions that would limit his risk exposure. Fortunately,
he had located another property that seemed to meet his needs— a well maintained four-unit apartment. The
price tag was $250,000, well within his range, and the apartment would require no remodeling. Seth figured he
could invest the other $100,000, and between the two hoped to have $1 million to retire on by age 55.
2. Seth’s current bank offers a 1-year certificate of deposit account paying 2% compounded semiannually.
A competitor bank is also offering 2%, but compounded daily. If Seth invests the $100,000, how much more
money will he have in the second bank after one year, due to the daily compounding?
Current Bank	Competitor Bank
	Semiannually		Daily
Difference in FV	=D36-C36