Name _____________________________
Lecture Time ________________
CSE1111 – Homework #5 (10 points) – Financial Functions
A
1 Purchase Price of Car
2
3
4
5
6
7
8
Bank Name
5/3 bank
Bank One
National City
Ohio Savings
CitiBank
B
Down
Payment
$ (1,000)
$
$ (2,500)
$
$
-
C
$ 35,000
D
E
Loan
Number # of Periods
Amount
of Years per year
$ 34,000
3
12
$ 35,000
5
12
$ 32,500
3.3
12
$ 35,000
4.0
12
$ 35,000
5
4
F
G
Payment per
Annual
period
Rate
$
(1,000.00)
3.7%
$
(675.00)
7.6%
$
(900.00)
5.5%
($830.02)
6.5%
$
(1,500.00)
6.0%
H
Ballon
Payment
$
$ (2,000)
$
$
$ (12,454)
I
J
Interest Paid
Over Life
Loan
Selection
$ (2,000.00)
reject
$ (7,500.00) select
$ (3,110.14)
reject
$ (4,841.12)
reject
$ (7,454.42)
Loans!
A
B
C
1
Redemption value of Bond:
2
Annual Interest Rate
3
Compounding Periods/year
4
# Years to Bond Maturity
5
Capital Gains tax Rate
6
7 Original Bond Investment
8 Sufficient funds to buy car after taxes (T/F)
D
$ 40,000.00
6%
12
10
15%
($21,985.31)
TRUE
Bond!
Our workbook consists of two worksheets where some initial information on financing a car has
already been laid out. Sheet Loans! Consists of several possible loan scenarios for the purchase of a
this new car. The information in the non-highlighted areas is provided for you. For example, row
four displays loan information from 5th/3rd bank. It assumes you will purchase the car for $35,000,
with a down payment of $1000 (column B), thus the loan amount is $34,000 payable monthly (12
payments per year given in column E) over the next three years (loan duration in column D) with no
balloon payment (Column H) at the end of the loan. You will be completing the rest of the
information for each loan (each loan is displayed in a single row), and answering several additional
questions as detailed below.
Worksheet Bond! contains information on a zero-coupon bond that you own – including the current
redemption value of the bond, its annual interest rate and compounding periods. Use the values
given here to answer questions 9 and 10.
Write the formulas such that if any of the inputs change (down payments, balloon payments, etc),
the formulas will still work. Please note when writing formulas, to receive full credit you must use
correct Excel syntax (ie: use * for multiplication, / for division, etc.). Do not use unnecessary $ or
functions. Also note, when writing your formulas, use cell references whenever possible.
1. (1/2 point) Write a formula in cell C4, which can be copied down to the cells C5:C8, to display
the loan amount. Note that the down payments in column B were entered as negative values.
Assume that this loan is compounded monthly.
CSE1111 Hw5C.doc
2. (1 points) Write a formula for cell G4, which can be copied down into cell G5, to determine the
annual interest rate of this loan. Assume that this loan is compounded monthly.
3. (1 points) National City Bank has offered you a loan at 5.5% interest rate with a down payment
of $2500. They have told you that payments will be $900 per month. Write an Excel formula in
cell D6 to calculate the duration of the National City loan in years. Assume that this loan is
compounded monthly.
4. (1/2 point) How would you modify the formula in question 2 if the payments are to be made at
the beginning of each period? Assume that this loan is compounded monthly.
5.
(1 points) Ohio Savings & Loan has also approved you for a loan with 6.5% interest, no money
down, and no balloon payments. Their loan is payable over the next four years with monthly
payments. Write an Excel formula in cell F7 to determine the monthly payment that will be
required on this loan. Assume that this loan is compounded monthly.
6. (1 points) Citibank is offering a loan to be paid quarterly over the next 5 years requiring $1500
per quarter and no money down. Whatever interest/principal is unpaid at the end of the 5 years
will be due as a balloon payment. Given an annual interest rate of 6%, write an Excel formula in
cell H8 to determine the value of the balloon payment. Assume that this loan is compounded
quarterly.
7. (1 points) Write a formula in cell I4 to determine the total interest that you pay over the life of
this loan (hint: value of all payments less the face value of the loan). Write the formula so it can
be copied down the column. Pay attention to the sign of the values. The total interest you pay
should be displayed as a negative value.
8. (2 points) You’re in a short-term financial crunch and want to accept a loan which minimizes
your monthly payments. However, you aren’t considering the Citibank loan since you don’t want
such a lengthy commitment. Given these criteria, write a formula in cell J4 to determine whether
or not to accept this loan. Write the formula so it can be copied down the column into cells J5:J7.
The formula should return either “select” or “reject”.
CSE1111 Hw5C.doc
9. (1 points) You have just realized that you still own a bond which is coming due this week. The
redemption value (amount of money that it is worth now) is $40,000. It has been accruing
(earning) interest at 6% per year compounded monthly for the past ten years. No additional
contributions or withdrawals were made. What was the original bond investment that was made
ten years ago?
10. (1 points) The government charges a 15% capital gains tax on the earned interest (redemption
value less original value). Write a formula in cell Bonds!D8 to determine (True/False) if you
have sufficient funds in which to purchase this vehicle from the proceeds of this bond after taxes
are paid.
CSE1111 Hw5C.doc