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## Can someone help me with a Time value formula?

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# Can someone help me with a Time value formula?

Time value You have \$1,500 to invest today at 7% interest compounded annually.

a. Find how much you will have accumulated in the account after (1) 3 years, (2) 6

years, and (3) 9 years.

b. Use your findings in part a to calculate the amount of interest earned in (1) the

first 3 years (years 1 to 3), (2) the second 3 years (years 4 to 6), and (3) the third

3 years (years 7 to 9).

c. Compare and contrast your findings in part b. Explain why the amount of interest

earned increases in each succeeding 3-year period

# Re: Can someone help me with a Time value formula?

@cgreene27.... I do not do other people's homework; and as a student, I would not take credit for the work of others.  But I can offer some guidance.

A. Look at the FV function.  \$1,500 is the "present value" (pv).  The periodic payment (pmt) is zero.  If you enter \$1,500 as a positive number, FV returns a negative value.  This is because Excel uses signed cash flows:  one sign (plus or minus) for inflows; the opposite sign for outflows.  If you want a positive value, simply write -FV(...) or enter -1500 for "pv".

B. FV gives the ending balance after "n" periods.  Since "pmt" is zero, the difference between FV for "n" periods and FV for "n-3" periods is the interest earned between periods "n-3" and "n".

C. This is not an Excel question.  Hopefully, the answer is "obvious".  Interest is earned on the beginning balance of each period (since "pmt" is zero).  Since interest is "compounded", think about what happens to the balance each period.

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