mocking Jay Part 1 (No. 1-13)

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Part 1

Instructions

Answer the following questions and complete the following problems, as applicable. Unless otherwise directed, assume annual compounding periods in computational problems.

You may solve the following problems algebraically, or you may use a financial calculator or Excel spreadsheet. If you choose to solve the problems algebraically, be sure to show your computations. If you use a financial calculator, show your input values. If you use an Excel spreadsheet, show your input values and formulas.

Note: In addition to your solution to each computational problem, you must show the supporting work leading to your solution to receive credit for your answer.

  1. "List and describe the purpose of each part of a time line with an initial cash inflow and a future cash outflow. Which cash flows should be negative and which positive" (Cornett, Adair, and Nofsinger, 2014, p. 91)?
  2. "How are the present value and future value related" (Cornett, Adair, &Nofsinger, 2014, p. 91)?
  3. "How are present values affected by changes in interest rates" (Cornett, Adair, &Nofsinger, 2014, p. 91)?
  4. "How much would be in your savings account in eight years after depositing $150 today, if the bank pays 7 percent per year" (Cornett, Adair, &Nofsinger, 2014)?
    • Recalculate the savings account balance, using a 6 percent interest rate, and again, using an 8 percent interest rate.
  5. "A deposit of $350 earns the following interest rates: (a) 8 percent in the first year, (b) 7 percent in the second year, and (c) 5 percent in the third year. What would be the third year future value" (Cornett, Adair, &Nofsinger, 2014)?
  6. "Compute the present value of a $850 payment made in 10 years when the discount rate is 12 percent" (Cornett, Adair, &Nofsinger, 2014).
    • Recalculate the present value, using an 11-percent discount rate, and again, using a 13-percent discount rate.
  7. "What annual rate of return is earned on a $5,000 investment when it grows to $9,500 in five years" (Cornett, Adair, &Nofsinger, 2014)?
    • Recalculate the rate of return, assuming the growth occurred in four years, and again, assuming the growth occurred in six years.
  8. Would you rather have a savings account that paid interest compounded on a monthly basis, or one that compounded interest on an annual basis? Why?
  9. What is an amortization schedule, and what are some of its uses?
  10. "The interest on your home mortgage is tax deductible. Why are the early years of the mortgage more helpful in reducing taxes than in the later years" (Cornett, Adair, &Nofsinger, 2014, p. 118)?
  11. What is the difference between an ordinary annuity and an annuity due?
  12. "What is the future value of a $500 annuity payment over five years if interest rates are 9 percent" (Cornett, Adair, &Nofsinger, 2014)?
    • Recalculate the future value at 8 percent interest, and again, at 10 percent interest.
  13. "What is the present value of a $700 annuity payment over four years if interest rates are 10 percent" (Cornett, Adair, &Nofsinger, 2014)?
    • Recalculate the present value at 9 percent interest, and again, at 11 percent interest.
    • 7 years ago
    mocking Jay Part 1 (No. 1-13)
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