Math 1090 Project 6 Futurepresent Value

Math 1090 Project 6 Future and Present Value
Introduction This project will the use an Excel spreadsheet to show how periodic payments to an
account over time will increase the account balance to reach some monetary goal in the
future. It will also show how the amount of debt will decrease over time with periodic
payments towards the debt.✫ Developing these payment schedules is important in
understanding how interest affects the balance of an accounts over long periods of time.
Part I-A There are many reasons for a savings plan. This part of the project assumes a person hopes to
purchase a new truck estimated to be $40,000 in two years. It would be good to have a down
payment of 15%; the current savings rate is only about 1%. The following shows how to use
these parameters in Excel to find the monthly amount to deposit into a savings account, and
then to show an investment schedule of the growing balance.
The spreadsheet should be setup like the

example at the right. Cells B1, B7 - B9,
and C12 - E15 are all formatted as
currency, cells B2 and B3 are formatted as
percentage,✵ and everything else is
general formatting.
Enter formulas for the remaining

information so the spreadsheet can be used
for different parameters. Find the down
payment in cell B7 by entering
=B1*B2. Find the amount of the loan to
pay the remaining cost in cell B8 by
entering =B1–B7. The monthly deposit is
found by dividing the amount down by the
future value of one dollar, so the formula
in cell B9 is = –B7/FV(B3/B4,B4*B5,1)
The formulas for the schedule are: cell

B13 enter =1+B12, cell C13 enter =B$9,
cell D13 enter =E12*B$3/B$4, and cell
E13 enter =E12+C13+D13. Select cells
B13 –E13, put the cross on the green
square at the lower right, right click the
mouse and drag the curser to cell E36.
Excel will calculate the total of cells C13 – C36 by entering =sum(C13:C36) in cell C38. The
total interest can be similarly calculated in cell D38.
Answer the following questions on your spreadsheet.

1. How much money is deposited?
2. What is the total amount of interest is earned?
3. What percent of the amount deposited is the interest earned? (Write answer to four
decimal places.)
4. How does the percent in #3 above compare to the APR? Explain.
Part I-B Change the parameters in Part I-A to saving for a 20% down payment of a $250,000
home in 3 years when a 1.5% APR can be found. Find the amount of the down
payment, the amount of the mortgage, and the monthly savings deposit. Although the
complete schedule needs to be worked out on a spreadsheet, only payment numbers 1
(row 13), payment 12 (initially in row 24), payment 24 (initially in row 36), and
payment 36 (initially in row 48) need to be shown. To hide the other payments 2 – 11
(initially in rows 14 – 23), payments 13 – 23, and payments 25 – 35 right clicking on the
rows, and clicking Hide.
1. How much money is deposited?

2. What is the total amount of interest is earned?
3. What percent of the amount deposited is the interest earned? (Write answer to four
decimal places.)
4. How does the percent in #3 above compare to the APR? Explain.
5. How do the answers in #4 Part I-A and #4 in Part I-B compare? Explain.
Part II-A This part of the project uses Excel to find the monthly payments for a loan at 2.25%
APR for a 5-year term. The future value spreadsheet for the truck down payment in
Part I-A above, can be extended like the example below. Cells G1, G9, and H12 -
K15 are all formatted as currency, cell G2 is formatted as percentage, and everything
else is general formatting.
Enter formulas referencing the information in

Part I-A. In cell G1 enter =B8. Find the amount
of the monthly payment using the Excel formula
in cell G9 by entering the formula = –
PMT(G2/G3,G3*G4,G1). Show the beginning
balance in cell K12 by entering =G1. In row 13
write these formulas for the schedule. In cell
G13 enter =1+G12, in cell H13 enter =G$9, in
cell I13 enter =G$2/G$3*K12, in cell J13 enter
=H13-I13, and in cell K13 enter =K12-J13.
Highlight cells G13 to K13, put the over the
green square in the lower right corner, left click
the mouse, hold the bottom down, and drag the
formulas down until there is zero balance. All
sixty payments don’t need to be shown, only
payments 1, 12, 24, 36, 48 and 60, so the
payments between should be hidden like the
hidden payment in Part I-B.
1. What is the total amount of principle paid for the sixty payments?
2. What is the total amount of interest paid for the sixty payments?
3. What is the total amount paid for the sixty payments?
4. The total interest is what percent of the amount of the loan?
Part II-B Assume that the home in Part I-B will be financed at 3.75% APR for a 30 year mortgage.
Find the monthly payment and create the payment schedule. Show this information like in
Part II-A above, for payment numbers 1, 12, 60, 120, 240, 360, and answer the following
questions:
1. What is the total amount of principle paid for the 360 payments?
2. What is the total amount of interest paid for the360 payments?
3. What is the total amount paid for the 360 payments?
4. The total interest is what percent of the amount of the loan?
5. How does the total percent of interest paid for the truck loan compare to the total percent
of interest paid for the mortgage?
Part III Reflect: How has this project helped you learn and understand about future and present
value? How do you think the results would change if the parameters “number of years” and
“number of payments per year” at the beginning of the project were changed? How could
you use this work to learn more about future value and present value? There are numerous
programs online that produce future value and present value schedules like these in the
project. Some such as http://dknelsonmathteacher.weebly.com/1030-links.html also show
how paying extra principle to the regularly scheduled payments affects the time and interest
paid.
✫
If you don’t have access to Excel on your computer, and you’re not going to use the computers at
the college that have Excel, you may be able to access a similar program through one of the
following options:
1) SLCC All Access https://allaccess.slcc.edu/vpn/index.html
2) Google online spreadsheet
3) Microsoft's free online Excel through "Microsoft OneDrive"
✵
When the cells are formatted as Percentage before entering the number, fifteen percent is entered
as 15 and is displayed as 15.00%. If the number is entered before formatting as Percentage, enter
.15, then format Percentage and it should be displayed as 15.00%.

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Math 1090 Project 6 Future and Present Value

The spreadsheet should be setup like the

Enter formulas for the remaining

The formulas for the schedule are: cell

Answer the following questions on your spreadsheet.

Answer the following questions on your spreadsheet.

1. How much money is deposited?

Enter formulas referencing the information in

Answer the following questions on your spreadsheet.

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