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CALCULATIONS IN EXCEL Assume
IN EXCEL Assume that you are nearing graduation and that you have applied for a job with a local bank. As part of the bank's evaluation process, you have been asked to take an examination which covers several financial analysis techniques.
The first section of the test addresses discounted cash flow analysis. See how you would do by answering the following questions.
1 What is the future value of an initial $100 after 3 years if it is invested in an account paying 10 percent annual interest?
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2 What is the present value of $100 to be received in 3 years if the appropriate interest rate is 10 percent?
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3 We sometimes need to find how long it will take a sum of money (or anything else) to grow to some specified amount.
For example, if a company's sales are growing at a rate of 6 percent per year, how long will it take sales to double?
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4 If you want an investment to double in six years, what interest rate must it earn?
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5 What is the future value of a 3-year ordinary annuity of $100 if the appropriate interest rate is 10 percent?
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6 What is the present value of the annuity?
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7 What would the future and present values be if the annuity were an annuity due?
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8 What is the present value of the following uneven cash flow stream? The appropriate interest rate is 10 percent, compounded annually.
YEARS 0 1 2 3 4
Cash Flow 0 100 200 -200 100
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9 What is the future value of $100 after 3 years under
a. 10 percent annual compounding?
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b. 10 percent semiannual compounding?
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c. 10 percent quarterly compounding?
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d. 10 percent monthly compounding?
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e. 10 percent daily compounding?
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10 What is the EAR for a nominal rate of 12 percent
a compounded semiannually
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b compounded quarterly
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c compounded monthly
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d compounded daily
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