1. Mr. Richards is trying to update his client presentations. He would like you to perform some future value calculations showing how great his returns are and how compounding works. He would like to show how $100,000 invested for 10, 20 and 30 years grows with his superior record of 8% annual returns. Just to underscore this he would also like the same compounding information with the historical annual market returns of 4%.
Excel: Use the standard TVM setup to determine the FV value given the PV of $100,000, rate of .04 and .08 and NPR of 10, 20, 30. Set this up and then copy and change values as described for each of the additional five scenarios. Create a summary table showing the years and rates and the compound interest earned. Also, create a summary table showing the year and rates and calculate the overall growth of each FV net of the PV. Use both of these tables in the write up. Written: Briefly describe the analysis that you have performed and explain the effect of compound interest. Describe what the growth rate of the money over, 10, 20 and 30 year spans. What is the difference in growth between the 4% and 8% rates? What do these rates say about the level of overall returns required to grow money and create wealth?
2. Mr. Richards needs more analysis to update his client presentations. He would like additional future value calculations. Using the same framework as in the last mini-project, calculate the future value of bank CDs that would pay 1% and 2% annual interest.
Excel: Copy the framework from the last mini-project and change the rates. Combine the summary tables from these analyses with the prior analysis to show the compound interest earned and overall growth rates for 10, 20, 30 years and annual returns of 1, 2, 4 and 8%.
Written: Briefly describe the analysis that you have performed and explain the effect of compound interest. Explain how the compound interest and growth rates differ across the different returns. Provide 3 summary points that could be used in a presentation about these returns.