You are preparing a presentation to convince people that an ordinary annuity tha
ID: 2456540 • Letter: Y
Question
You are preparing a presentation to convince people that an ordinary annuity that earns 9% annual interest will have a higher future value than one that earns 5% annual interest. You decide that a graph will help convince people that this is true. a. Use excel to graph the future value versus time of an ordinary annuity with $250 payments per month at 5% and 9% annual interest. Make sure that your graph convinces people that 9% is better. b. Use the graph to estimate (or table) when the 9% annuity will have $1,000 more than the 5% annuity.
Explanation / Answer
As seen above 9% interest rate give a higher return and the difference in the value after 45 month comes 1025.38.
Period Monthly Interest @ 0.75% pm Interest @ 0.4167% pm Difference 1 250 251.875 251.0417 0.833333 2 250 505.6391 503.1293 2.509722 3 250 761.3064 756.2674 5.038976 4 250 1018.891 1010.46 8.430993 5 250 1278.408 1265.712 12.69576 6 250 1539.871 1522.028 17.84335 7 250 1803.295 1779.411 23.88393 8 250 2068.695 2037.867 30.82777 9 250 2336.085 2297.4 38.6852 10 250 2605.48 2558.014 47.46667 11 250 2876.897 2819.714 57.18272 12 250 3150.348 3082.504 67.84397 13 250 3425.851 3346.39 79.46114 14 250 3703.42 3611.375 92.04507 15 250 3983.07 3877.464 105.6067 16 250 4264.818 4144.662 120.1569 17 250 4548.68 4412.973 135.707 18 250 4834.67 4682.402 152.268 19 250 5122.805 4952.953 169.8514 20 250 5413.101 5224.632 188.4684 21 250 5705.574 5497.443 208.1307 22 250 6000.241 5771.391 228.8498 23 250 6297.118 6046.48 250.6375 24 250 6596.221 6322.715 273.5056 25 250 6897.568 6600.102 297.4659 26 250 7201.174 6878.644 322.5306 27 250 7507.058 7158.347 348.7117 28 250 7815.236 7439.215 376.0215 29 250 8125.725 7721.253 404.4724 30 250 8438.543 8004.467 434.0768 31 250 8753.707 8288.86 464.8473 32 250 9071.235 8574.439 496.7965 33 250 9391.145 8861.207 529.9372 34 250 9713.453 9149.171 564.2825 35 250 10038.18 9438.334 599.8452 36 250 10365.34 9728.702 636.6384 37 250 10694.96 10020.28 674.6756 38 250 11027.04 10313.07 713.9699 39 250 11361.62 10607.09 754.5349 40 250 11698.71 10902.32 796.3842 41 250 12038.32 11198.79 839.5315 42 250 12380.49 11496.49 883.9906 43 250 12725.21 11795.44 929.7755 44 250 13072.53 12095.63 976.9003 45 250 13422.45 12397.07 1025.379Related Questions
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