Finance Assignment

1755 Words Jul 2nd, 2013 8 Pages
Assignment 1
Q1.) (5 points) $50 today is worth MORE than $50 tomorrow.(Tell True or False)
Q2.) $100 invested for 10 years at 12% interest is worth more in FV terms than $200 invested for 10 years at 4% interest. (Tell True or False)
Q3.) Shawn wants to buy a new telescope. He estimates that it will take him one year to save the money and that the telescope will cost $200. At an interest rate of 6%, how much does Shawn need to set aside today to purchase the telescope in one year?
Q4.)Johnny and Darren both earn $100 working on their respective neighbors' big farms. Johnny puts his $100 in the piggy bank that his parents gave him to encourage him to save. Darren puts his money in a savings account his parents set up for him. The savings
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The stated annual interest rate is 12%, but interest is compounded monthly and he will make monthly payments. The effective annual interest rate (EAR) of the loan is less than 12%.
Question 2
(5 points) Gloria is 35 and trying to plan for retirement. She has put a budget together and plans to save $4,800 per year, starting at the end of this year, in a retirement fund until she is 65. Assume that she can make 7% on her account. How much will she have for retirement at age 65?
Question 3
(5 points) Dominique has just turned 65 and she has deposited her annual payment of $20,000 into her retirement account. She made her first such saving deposit into this fund on her 35th birthday. Dominique has also retired and wants to figure out how much money she has in her retirement account for her retired life. You are Dominique's friend who knows finance. How much is Dominique's savings worth today given that the fund has earned an annual return of 5.5%? (Enter just the number without the $ sign or a comma; round off decimals.)
Answer for Question 3

Question 4
(5 points) Marcel has just graduated from college and has found a job that will pay him $25,000 per year at the end of each year, but the job is only for 5 years. He is not worried about that because he plans to do an MBA after gaining 5 years experience anyway. What is the value today of his 5-year salary assuming that the interest rate is 3%?

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