# Financial Management

**FN 215 – Financial Management**

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**Problem Set # 5**

(Due: Monday, October 20, 2014)

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*Rules for all problem sets:*

· Do your own work. Do not copy material from others.

· Problem sets must be submitted in hard copy form. Do not submit electronically.

· Show all work and/or explain your answers.

Answer all 6 questions.

*Question 1*

The initial investment is $30,000. Annual interest rate is 4.75%. Maturity: 16 years. Using the equation/calculator method, determine the “future value” for each of the following scenarios. You may round to the nearest dollar.

A. Annual compounding

B. Quarterly compounding

C. Monthly compounding

D. Continuous compounding

Be sure to show all equations.

*Question 2*

Same inputs as Question 1, but use Excel. Attach a hard copy of the Excel spreadsheet. Be sure this spreadsheet print out the actual formulas and answers. Answers should be rounded to nearest penny.

*Question 3*

You will receive $1,000,000 lump-sum, 25 years later. The discount rate is 3.25%. Using the equation/calculator method, determine the “present value.” Show the equation.

*Question 4*

Interpret your result from Question 3.

*Question 5*

Calculate the “present value” for the following annuity: $40,000/year, 25 years, discount rate 5.5%. Use equation/calculator method.

*Question 6*

Same inputs as Questions 3 & 5, solve by Excel. Attach hard copy of Excel spreadsheet showing actual formulas and answers. Round answers to nearest penny.

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