T2 EIC 3 (Lecture)

This EIC question provides specific guidance on the best practice of adjusting per annum discount or compounding rates in Excel. It directly builds on the Excel demonstrations in Video Lecture B, where you are required to setup Excel calculators to bring into your Tutorial. If you have not completed Video Lecture B nor setup the Excel Calculators in your Excel Class Workbook (as required in Video Lecture B), you will not be able to complete this question nor EIC 4. 

You are given a 5% per annum discount rate that you need to convert to a monthly discount rate. This is because the future cash flow that you wish to discount is a monthly cash flow. What is the monthly discount rate? Enter your answer below to 2 decimal places. In these Moodle numerical questions, you need to enter you anwers without units (i.e. no $ or %) and no formatting (no commas) except for a decimal place (an appropriately formated answer is 0.11). 

The way you achieve your answer is by typing in the Excel formula =5%/12 directly into the i variable of a copy of the PV or FV Excel calculators. This will provide an exact answer with all decimal places captured, though only 2 decimal places are displayed.

Do not calculate the answer separately (e.g. on your phone or another place in Excel) and then type in the discount rate.

T2 EIC 4 (Lecture)

Tim is also trying to make the best choice between a pre-paid mobile plan and a monthly plan. He is considering a one month pre-paid plan of $50, payable today or a $52 monthly plan, payable at the end of the month. 

He is currently earning 5% p.a. (per annum) interest on a term deposit and realises that his expenses are made at the sacrifice of investable capital. So the 5% p.a. return he sacrifices for paying for expenses like the mobile phone is an opportunity cost that can be used as a discount rate to work out the time value of money, present value cost of the $52 monthly plan, today.

Using a discount rate of 5% p.a., the present value cost of $52 paid in 1 month's time is...? 

(Note: If you have not completed the Excel Classworkbook setup as required in Video Lecture B, you will not be able to complete this KCT.)

(enter your answer to 2 decimal places, with no units, i.e. with no $ or commas. e.g. an appropriately formatted answer is 43.21. Make sure you use the guidance in KCT3 to calculate  and enter your monthly discount rate into Excel correctly)