Scenario:
Liam is saving for a down payment on a house. He’s currently working online and independently managing his finances. Let’s help him figure out how much he’ll have saved by the end of year 3!
Information:
- Liam has $35,000 saved already.
- He expects a bonus of $12,000 at the end of year 1.
- He plans to increase his monthly savings contributions starting in year 2.
- He’ll contribute $2,000 per month in year 2 and year 3, totaling $24,000 per year.
- Liam will invest all his savings in a mutual fund with a steady 5% annual return compounded yearly. (Compounded interest means interest is earned on both the initial investment and the accumulated interest from previous years.)
Goal:
Calculate how much money Liam will have in his account at the end of year 4 assuming he sticks to his savings plan and the investment performs as expected.
- Use Microsoft Excel:
- Open Microsoft Excel and create a new spreadsheet.
- Use the provided information about Liam’s savings plan to create a table similar to the one in the video that tracks his contributions each year.
- Calculate Future Value:
- Remember, the interest is compounded annually. Use Excel’s built-in functions or formulas to calculate the future value of Liam’s savings at the end of each year.
- There are helpful Excel tutorials online that explain how to calculate future value with compound interest.
- Organize and Present Your Work:
- Make sure your Excel sheet is easy to understand. Include clear labels for rows and columns and any necessary formulas you used.
