Time Value of Money: Excel Calculations and Financial Report

This assignment delves into the core concepts of the time value of money, encompassing the calculation of future and present values. The student utilizes Excel to perform financial calculations based on provided scenarios involving investment rates, time periods, and initial investments. The assignment is divided into multiple parts, each focusing on different aspects of time value of money, including future value calculations for a retirement account, present value calculations for different investment opportunities, and the determination of interest rates and time periods based on specific financial goals. The student presents the findings, including calculations, and graphical representations, with references to relevant financial literature.

Running head: TIME VALUE OF MONEY
Time Value of Money
Name of the Student:
Name of the University:
Author Note:

1TIME VALUE OF MONEY
Table of Contents
Answer to Part 1:........................................................................................................................2
Part A:....................................................................................................................................2
Part B:.....................................................................................................................................2
Answer to Part 2:........................................................................................................................2
Part C:.....................................................................................................................................2
Part D:....................................................................................................................................2
Answer to Part 3:........................................................................................................................3
Part E:.....................................................................................................................................3
Part F:.....................................................................................................................................3
Answer to Part 4:........................................................................................................................3
Part G:....................................................................................................................................3
Part H:....................................................................................................................................3
Answer to Part 5:........................................................................................................................4
Part I:......................................................................................................................................4
Part J:......................................................................................................................................4
Bibliographies:...........................................................................................................................6

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Answer to Part 1:
Part A:
The rate of the investment is 9%, while the number of periods is 45 years. The
investment has been made of $5000 and no further investment is expected, hence PMT is
taken as 0. Thus upon using the excel function which is given by =FV, the future value of the
investment is $241636.4.
Part B:
The four present values which had been given are $2590, $7500, $85300 and $
221600. The periods are different with respect to each present value which are of the 8, 15,
19 and 24 respectively. The rate or the rate of investment is 14%, 6% 8% and 4 %
respectively. Thus upon using the FV function in excel the corresponding future value are
$8415.13, $17974.19, $368129.3 and $ 568028.2 respectively.
Answer to Part 2:
Part C:
The rate of investment is taken as 10%, while the time period for the investment is 12
years. The future value which is required after the said time is $180000. Thus a certain sum
of investment has to be invested to accumulate the future value after 12 years. Thus the
present value of the money which needs to be invested is $57353.55, which is calculated
using the PV function in excel.
Part D:
The present value is the amount which needs to be invested today for a certain amount
in future, given the rate of investment and the time period. Thus the future value which is

3TIME VALUE OF MONEY
different along with different time period and interest rate provides the following present
value. The present value is calculated using the PV function in excel and is $8136.67,
$19140.03, $89239.51 and $26234.54 respectively.
Answer to Part 3:
Part E:
The rate of investment has an immense role to highlight the amount which can be
accumulated in future. Thus the rate is calculated using the excel rate function using the
inputs of 225 years, present value to be $0.01 and the future value to be $300000. Thus the
rate of investment which is calculated is 7.95%.
Part F:
The rate of interest which is calculated is different for the different investments due to
the different level of present value, future value and the investment period. The rate of
interest which is calculated is 6.29%, 5.7%, 9.15% and 9.76% respectively for the different
investments.
Answer to Part 4:
Part G:
The periods or the time is an important part of the rate of investment since, this
highlights the time for which the amount is held for investment. The number of years which
is calculated for the investment is 37.39 years.

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Part H:
The investment years depend on the value of the present value, future value and the
rate at which the investment is made. Thus the years which has been calculated for the
different investments is 22.49 years, 4.8 years, 20.16 years and 12.25 years.
Answer to Part 5:
Part I:
The interest rate has a strong relation with the future value of the investments, which
is highlighted in detail in the figure below,
Figure 1: Interest Rate-Future Value
Source: By the Author

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Part J:
The graph highlighting the effect on the future value when the rate of interest changes
is presented below, and proves that when the present value and the number of periods of an
investment is constant, the interest rate is directly proportional to the future value of the
investment.
Figure 2: Interest Rate-Future Value
Source: By the Author

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Bibliographies:
Chan, K., & Rate, E. A. I. (2019). & 6 The Time Value of Money. Financial Management.
Johari, M., Hosseini-Motlagh, S. M., Nematollahi, M., Goh, M., & Ignatius, J. (2018). Bi-
level credit period coordination for periodic review inventory system with price-credit
dependent demand under time value of money. Transportation Research Part E:
Logistics and Transportation Review, 114, 270-291.
Kahn, M. J., & Baum, N. (2020). Time Value of Money, or What Is the Real Financial Value
of an Opportunity?. In The Business Basics of Building and Managing a Healthcare
Practice (pp. 9-12). Springer, Cham.
Muda, I., & Hasibuan, A. N. (2017). Public Discovery of the Concept of Time Value of
Money with Economic Value of Time. Proceedings of MICoMS, 251-257.