Instructions: You are required to use a financial calculator or spreadsheet (Exc

Question

Instructions:
You are required to use a financial calculator or spreadsheet (Excel) to solve 10 problems (provided on page 3) on the applications of the time value of money. You are required to show the following 4 steps for each problem (sample questions and solutions are provided for guidance):
(i) Develop the timeline (linear representation of the timing of cash flows)
(ii) Identify the time value of money variable (PV, FV, PMT, N or Rate) which needs to be calculated in the question.
(iii) Identify the values of the remaining four variables (PV, FV, PMT, N or Rate) from the question. Be sure to input positive or negative signs.
(iv) Calculate the correct value of the variable identified in step (ii).

Problem:

2. At what rate must $287.50 be compounded annually for it to grow to $572.86 in 8 years? Submit your answer as a percentage and round to two decimal places.

Explanation / Answer

PV = 287.50
FV = 572.86
Time = 8 Years
FV = PV * ( 1+r)n
572.86 = 287.50 * ( 1+r)8
r = (572.86/287.50)1/8-1 = 9.00%

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