For those that are a bit apprehensive about doing these calculations, below is a worked out problem that is likely the most complicated that you will come across in this class – but it is straightforward.
- The rate is 7% and the investment is for 5 years that is compounded annually (so when the investment is compounded annually, then the number of years is the NPer that you need to calculate – if the investment compounds semiannually, quarterly, monthly or daily, then see the chart I created in another post to get the number of periods).
- The payment was $15,000 for every term you would add $15,000 each year at the beginning of the year. (Enter in Excel as a negative Number as this is an outflow to you)
- Also there is $175,000 amount that you will deposit in the investment today… so this is the Present Value. is $175,000. >(enter in Excel as a negative number as this is an outflow to you)
- Enter Type 1 because, you’re making the payment at the beginning of the period.
Your spreadsheet should look something like:
Therefore, our future value is $??????? (For reference – the answer is in the table)
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