The Day of the Final

Wednesday, May 6th

In order to really increase your newsletter business, you are going to need to buy a color laser printer. Your consultant tells you that if you have a good color printer, you should be able to clear $250 profit every week, if you continue to sell your newsletter at $1.25 a copy.

Your dad is willing to loan you the money, providing you pay it back in 26 weekly payments, starting one week after the loan. However, dear old dad will charge you 0.5% interest per week (a yearly rate of 26%). You would be better off using a credit card, but you don't have one. So, you will make 26 payments of $250 each (using all of your profit to pay back the loan) for a total of $6500. However, because of the interest due, you won't be able to borrow the full $6500.

First, you need to demonstrate how the PMT function is used in this example. The total loan principal you can borrow in this situation is $6,081. Use the PMT function in Excel to verify this number and show the results as in the upper left-hand corner of this example.

Next, using the information
in this web page as a guide, construct a spreadsheet that shows the week number,
the amount owed at the start of the week, the interest charged by dad during the
week (which will be 0.5% of the amount owed at the start of the week), and the amount
owed at the end of the week after the $250 payment. Note that the amount owed at
the end of the week is the amount owed at the start of the week plus the amount of
interest for the week less the $250 paid at the end of the week. (If this sounds
confusing, read the formulas carefully and follow them through step by step to see
how it works.) Show this information for all 26 weeks. Note that the amount owed
at the end of the week should be the same as the start of the next week. If you have
done everything correctly, the amount owed at the end of the 26^{th} week
should be zero. Hurrah!

Now construct a chart to plot the amount owed at the start of each week as a function
of the week number. You might want to add a 27^{th} week, since at the start
of the 27^{th} week the amount owed is zero. Put labels on the chart, and
title the chart.

Print out a spreadsheet with the chart showing on it. The chart will look something like this. The spreadsheet should show the computations for the 26 weeks, as in this example.

Then print out the spreadsheet making the formulas visible, as in this example.

Turn in these three printouts: the table reflecting values; the graph reflecting those values; and the table again, this time reflecting the formulas. Be sure to include your name and section number in the headers.