For the Time value of money, I want you to explore the \"=RATE(...)\" function i
ID: 2520637 • Letter: F
Question
For the Time value of money, I want you to explore the "=RATE(...)" function in Excel. It calculates the required interest rate your investment has to generate to match your annual contributions to the desired future value. For this exercise you will need to come up with three values (required inputs for RATE function): 1) Number of years until retirement (NPER); 2) How much you are willing to contribute every year (PMT), and the desired amount of money you wish to have at retirement ($1 to $3 million is common). Set your PV (present value) to zero.
Is this a realistic rate of return?
Which investment product would offer this rate of return?
Explanation / Answer
Future value at retirement
1000000
Nper
20
PMT
-20000
Present value
0
rate = rate function in M S EXCEL
RATE(20,-20000,0,1000000)
8.80%
Yes this is a realitic rate of return with low degree of risk
Investment in mutual fund will offer this rate of return with minimum risk and this investment will diversify the risk
Future value at retirement
1000000
Nper
20
PMT
-20000
Present value
0
rate = rate function in M S EXCEL
RATE(20,-20000,0,1000000)
8.80%
Yes this is a realitic rate of return with low degree of risk
Investment in mutual fund will offer this rate of return with minimum risk and this investment will diversify the risk