Question

Assume you can earn 9% on the investments described below. How much money would each investment provide for you after six years? a. Invest $4,300 as a lump sum today. b. Invest $1,468 at the end of each of the next 6 years. c. Invest a lump sum of $2,559 today and $880 at the end of each of the next 6 years. d. Invest $798 at the end of years 1, 3, and 5.

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

A B D PV $4,300.00 9% 1/Y N FV Investment, today Annual interest rate No. of years Value of Investment at end of 6 year | $7,211.53 $1,468.00 9% PMT Annual Investment at end of each year 1/Y Annual interest rate N No. of years FVValue of Investment at end of 6 year $11,044.26 PV | PMT 1/Y N FV Investment, today Annual Investment at end of each year Annual interest rate No. of years Value of Investment at end of 6 year $2,559.00 $880.00 9% $10,912.23 End of Year 1 1 | Years for which Investment amount invested $798.005 $798.00 3 $798.00 1 Future value Factor 1.53861 1.2950 1.0900 5 Annual Interest rate 9% Value of Investment at end of 6 year $3,131.08

Cell reference -

A B wN- 4300 0.09 PV Investment, today 1/4 Annual interest rate N No. of years FV Value of Investment at end of 6 year =FV(D4,D5,,-D3,0) 1468 0.09 PMT Annual Investment at end of each year 1/4 Annual interest rate N No. of years FV Value of Investment at end of 6 year =FV(D9,D10,-D8,0) PV Investment, today PMT Annual Investment at end of each year 1/4 Annual interest rate N No. of years FV Value of Investment at end of 6 year 2559 880 0.09 =FV(D15, D16,-D14,-D13,0) End of Year Investment 798 1 3 Years for which amount invested =6-C20 =6-C21 =6-C22 Future value Factor = (1+$D$24)^ E20 = (1+$D$24)^E21 =(1+$D$24)^E22 798 5 798 Annual Interest rate 0.09 Value of Investment at end of 6 year =SUMPRODUCT(D20:D22,F20:F22)

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.