1 SS.02.3/4 - Analyzing Financial Situations MCR3U - Santowski

2 (A) Review the formulas we have to date are as follows: the formulas we have to date are as follows: Compounded interest: A = FV = P(1 + i) n which we can rearrange to develop a present value formula PV = A(1 + i) -nCompounded interest: A = FV = P(1 + i) n which we can rearrange to develop a present value formula PV = A(1 + i) -n Annuities: we have a future value formula  FV = A = (R[(1+i) n - 1])/iAnnuities: we have a future value formula  FV = A = (R[(1+i) n - 1])/i Annuities: we have a present value formula  PV = A = R[(1-(1+i) -n )/i]Annuities: we have a present value formula  PV = A = R[(1-(1+i) -n )/i] in each case, we have to decide whether the question involves an annuity or a simple, one time investmentin each case, we have to decide whether the question involves an annuity or a simple, one time investment

3 (B) Using the TVM Solver on the Graphing Calculator ex. Determine the monthly payments on a $15,000 loan to be paid in monthly for 5 6.5% compounded semi annually p.a. We will be using the TVM Solver on the GC ex. Determine the monthly payments on a $15,000 loan to be paid in monthly for 5 6.5% compounded semi annually p.a. We will be using the TVM Solver on the GC (1) Hit the APPS key(1) Hit the APPS key (2) Select 1:Finance(2) Select 1:Finance (3) Select 1:TVM Solver(3) Select 1:TVM Solver (4) set N = 60 (why?)(4) set N = 60 (why?) (5) set I%= 6.5(5) set I%= 6.5 (6) set PV = 15000(6) set PV = (7) set PMT to 0(7) set PMT to 0 (8) set FV = 0 (why?)(8) set FV = 0 (why?) (9) set P/Y = 12 (why?)(9) set P/Y = 12 (why?) (10) set C/Y = 2 (why?)(10) set C/Y = 2 (why?) (11) move cursor to PMT(11) move cursor to PMT (12) hit ALPHA and then the ENTER key(12) hit ALPHA and then the ENTER key (13) you should see the value – (13) you should see the value –

4 (C) Examples ex 1. Find the future value of $7500 invested for nine years at 8%/a, compounded monthlyex 1. Find the future value of $7500 invested for nine years at 8%/a, compounded monthly ex 2. I would like to have $3500 at the end of 5 years to buy a new racing bicycle. So how much should I invest now in an investment that yields 9%/pa compounded quarterly?ex 2. I would like to have $3500 at the end of 5 years to buy a new racing bicycle. So how much should I invest now in an investment that yields 9%/pa compounded quarterly? ex 3. I am planning on investing $1500 at the end of each year into an account that pays 4.5%pa compounded annually. What is the balance in the account after 5 years?ex 3. I am planning on investing $1500 at the end of each year into an account that pays 4.5%pa compounded annually. What is the balance in the account after 5 years? ex 4. I want to have $150,000 in my retirement investment when I retire in 15 years. How much should I invest monthly into an account that yields 7%pa compounded monthly?ex 4. I want to have $150,000 in my retirement investment when I retire in 15 years. How much should I invest monthly into an account that yields 7%pa compounded monthly?

5 (D) Homework Nelson Text, page 171, Q(a) - (f)Nelson Text, page 171, Q(a) - (f)