Deliverable Length: 3 Parts: See Assignment Details
The CEO has decided to plan for a salary action affecting a number of individuals in the organization. He has decided to give a $2,000 cost-of-living pay increase to all hourly employees and a $4,000 increase to all software analysts with salaries less than $55,000. However, he wants to do this in 2 years. He wants you to give him two options (you do not have to recommend an option).
Option 1: How much would he have to invest today in a single lump sum at a 6% annual interest rate compounded quarterly to have sufficient funds to execute his plan?
Option 2: How much would he have to invest in equal monthly payments at a 3% annual interest rate compounded monthly to have sufficient funds to execute his plan?
Part 1:
Because the CEO wants to increase salaries for all hourly employees and software analysts, there needs to be a count of the employees in each category.
Part 2: Use the funding you calculated in Part 1 and the appropriate compound interest formulas you learned in business algebra to calculate the investment amounts for options 1 and 2. Show your calculations in any empty area on the worksheet created in Part 1.
Hints:
Excel Functions:
PV – Returns the present value of a future amount
PMT – Calculates the payment necessary to accumulate a future amount
Compound Interest Formulas:
A = P(1 + i)n
FV = PMT × (1 + i)n – 1 i
Part 3: Add at least 1 paragraph to the memo from Week 4 showing the comparison between the two investment options.
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