 Hello, welcome to the instructions, the audio instructions for Worksheet B. Worksheet B is asking you to work out some present value and future value problems, and a lot of go over how you should do it. There's four tabs under the worksheet. Use complete the tabs. The first worksheet is about future value, and it's asking you to use the space below to calculate the future value of $1,000 invested today for 20 years at 4% interest. How would you do that? Well, this is a model again. The parts in blue are going to be the input cells. In this case, you're going to put in the principal value of $1,000, the interest rate of 4% 0.04, and the years investment at 20 years. Then you need a formula that's going to give you the future value at the end of those years. I can even do this one for you. The future value is going to be the principal times, oops, but I messed it up already. You have to start with equals, the principal times parentheses, 1 plus the interest rate raised to the power of the years. That is going to be your answer. You should understand where that formula came from. I'm not going to do the rest of the formulas for you, but that's the basic idea. We have a model that calculates the future value of $1,000 at 4% for 20 years. The beauty of this model is the formula is already there. If we want to know what our future value is in 10 years, we just change 20 to 10. If we want to know what the future value is if the interest rate changes to 10%, we just change it to 10%. Every time the future value is being recalculated and is changing there. That's part one. Question two is asking you to calculate the future value of these numbers and enter the value into these cells. You need to create a formula in this cell that can be copied and pasted down this row such that it gives you the future value of these combinations of data. You can check your answer by typing in say you have the value in this cell. You can check your answer by typing in here 300 for the principle as long as you've done this part right. 15% for the interest rate and 9 years to maturity. So in this cell you should have this number here, 1055. That's part one. Future value part two is asking you to do it again. Create a model this time without so much structures that you kind of have to know where to put the numbers and you model up here. And once you do that create a data table which shows how the future value varies with the years to the investment is going to be in place and the interest rate. You should remember how to construct a data table from the worksheet A. Remember what you're going to do is you're going to put, you're going to create a model, calculate the future value, you're going to put it in that cell there. Then you're going to make sure that this cell here, cell A15, references that cell there. Then you're going to highlight this range and you're going to go up to data, what if analysis data table and you're going to enter the row and the input cell properly. The rows are the years and the column of the cell is the interest rates. You're going to choose years and interest rate in the right places and then it should populate the results for you there. When you're building this model, remember you don't, doesn't matter what numbers you put in here, you choose any numbers you want in here as long as the formula is right, what matters is what you put in here. Although I should say maybe that's not quite right. You do need to put a thousand dollars for the principle because the data table is going to, it can only vary two values but this model has three values that might change. So we're going to hold the principle constant at a thousand. So you want to make sure that that says a thousand because the data table will obviously change depending on if this is a thousand or 500 or whatever. So we want to keep that at a thousand. The next tab is asking about the present value. Slightly different than the future value which you should be learning from the textbook. Again, it's just like the first tab, create a model that calculates present value. You have to find the appropriate formula, do it again, paste the formula down here and make sure it works. Present value part two. Again, it's just like future value part two except that I have not given you a template with which to construct the data table. Okay, so I'd like you to construct a data table down here that shows how the value of a thousand dollars is varying with the timing of the payments as well as the interest rate. You should use future value two worksheet as a guide. So you might look at these interest rates and these years. Now there may come a time when you, for whatever reason you want to look at a different number of years. Say you don't want 1, 2, 3, 4. You might want 1, 2, 3, 4 then 10, 20, 30, 40 to give you sort of a bigger range, sort of a tight range early and then a longer range later. Or you might look at interest rates in the 10, 20, 30% category. The important thing to realize is why are you constructing this data table? You want, there's some economic value or meaning in choosing the row variables and the column variables. At this point it doesn't really matter but later when you do your assignment on the mortgages it might make some sense to choose values that seem reasonable given for the prices of housing and interest rates on mortgages. I think that's it for the instructions for this section.