concept of time value of money
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As of July 16, 2007 the 10-year return for the S&P was 9.28% (Accessed from http://www.barra.com/Research/SummaryReturns.aspx)
Question #1. How much will you have if you put $100 into an account each month for 10 years starting today if you earn the 10-Year S&P 500 return? (show your work. If you use Excel or a financial calculator, explain the steps you used to answer the question)
As of July 16, 2007, the 5-Year S&P small cap 600 return was 13.58% (Accessed from http://www.barra.com/Research/SummaryReturns.aspx)
Question #2. Using the above amount as the 5-Year S&P small cap 600 return; What is the present value of $10,000.00 received at the end of the year for the next 5 years if you use the current 5-Year S&P small cap 600 return as your discount rate? (Show your work. If you use Excel or a financial calculator, explain the steps you used to answer the question)
Question #3. Briefly discuss how one can apply what was learned in this project to one's career or personal financial life.
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Solution Summary
The concept of time value of money that is present value of money and the future value of money is clarified.
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As of July 16, 2007 the 10-year return for the S&P was 9.28% (Accessed from http://www.barra.com/Research/SummaryReturns.aspx)
Question #1. How much will you have if you put $100 into an account each month for 10 years starting today if you earn the 10-Year S&P 500 return? (show your work. If you use Excel or a financial calculator, explain the steps you used to answer the question)
Thus one has to calculate the compounded value of annuity of monthly installment.
Here we have to find out the compounded value of annuity
F=A*((1+r)^n-1)/r
F=Future value, A= Annuity r= rate of ...
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