Loading...

Messages

Proposals

Stuck in your homework and missing deadline? Get urgent help in $10/Page with 24 hours deadline

Get Urgent Writing Help In Your Essays, Assignments, Homeworks, Dissertation, Thesis Or Coursework & Achieve A+ Grades.

Privacy Guaranteed - 100% Plagiarism Free Writing - Free Turnitin Report - Professional And Experienced Writers - 24/7 Online Support

Financial management time value of money questions and answers

02/12/2021 Client: muhammad11 Deadline: 2 Day

FIN 701, PRACTICAL APPLICATION 1, SPRING 2020 AP1

Assume that you are nearing graduation and that you have applied for a job with a local bank. As part of the bank’s evaluation process, you have been asked to take an examination that covers several financial analysis techniques. The first section of the test addresses time value of money analysis. See how you would do by answering the following questions:

For each problem, you need to show your work in order to receive credit. A correct answer with no work shown gets half credit (which means you fail the assignment). An incorrect answer with no work receives 0 credit. With time value of money (TVM) problems, that means showing your inputs for the financial calculator. Make your final answer very clear for the graders. Please don’t make them hunt for your answer.

For example, on 1a, I would show:

N = 3; I/Y = 12; PV = -850; PMT = 0, Calc FV = _______

For uneven cash flows, show CF0 = xx, CF1 = xx F01 = x; CF2 = xx F02 = x, etc.

Show all dollar and percentage values to two decimals ($xxx.xx) and percentage values to x.xx% (be sure to have sufficient decimals showing on your calculator). Rounded answers will receive point deductions.

In some cases, an equation will be easier than using the TVM keys, show your equation if that is the case.

If you use Excel, show what the equation and inputs used.

As with all TVM problems, assume annual compounding unless otherwise specified. Further, assume “regular” annuities (end of period payments) unless specified as “annuities due” (beginning of period payments).

1. (a) If you deposit $200 in the bank today, what is its future value at the end of three years if it is invested in an account paying 12% annual interest, assuming annual compounding? (1 point)

(b) What is the present value of $200 to be received in three years if the appropriate interest rate is 12% (annual compounding)? (1 point)

2. We sometimes need to find how long it will take a sum of money (or anything else) to grow to some specified amount. (a) For example, if a company’s sales are growing at a rate of 18% per year, approximately how long will it take sales to triple? (1 point)

(b) If you want an investment to double in 3 years, what interest rate must it earn? (1 point)

3. (a) What is the difference between an ordinary annuity and an annuity due? (2 points)

(b) What type of annuity is shown in the following cash flow timeline? (1 point)

(c) How would you change it to the other type of annuity? (Think about the cash flows) (1 point)

4. (a) What is the future value of a 3-year ordinary annuity (recall that ordinary annuities have end of year cash flows) of $200 if the appropriate interest rate is 12%? (1 point)

(b) What is the present value of the annuity? (1 point)

(c) What would the future and present values be if the annuity were an annuity due (beginning of year cash flows)? Hint, set your calculator to BGN, there is a video in M2 that shows you how to do this. Don’t forget to reset to “END” after you work an annuity due problem.

(1 pt) PV =

(1 pt) FV =

Note: Look at the difference between an annuity vs. annuity due for the respective PVs and FVs. This relationship is something you will want to remember.

5. What is the present value of the following uneven cash flow stream? The appropriate interest rate is 12%, compounded annually. Note that the final cash flow represents a project where there may be reclamation or other “end of project” costs which are greater than any final income and/or salvage value. (1 point)

6. What annual interest rate will cause $200 to grow to $251.94 in 3 years? (1 point)

7. (a) Will the future value be larger or smaller if we compound an initial amount more often than annually—for example, every 6 months, or semiannually — holding the stated interest rate constant? Explain your answer. (2 points)

(b-1) What is the future value of $200 after three years under 12% semiannual compounding? (1 point)

(b-2) What is the effective annual rate for 12% interest with semiannual compounding? Be sure to show your EAR answer to 2 decimals, that is xx.xx% (1 point)

Hint: Go to practice problem 26 and review the problem and solution. Also note in Moodle: “Video, how to work Practice Problems #26 & 27). This provides a “click by click” solution for EAR problems using the BAII plus with the equation.

· There are multiple ways to calculate EAR, whichever method you use, you need to show your inputs. If using equation: EAR = ( 1 + APR/m)^m, identify APR and m

· If using the financial calculator’s “ICONV” function, identify NOM, and C/Y

· If using Excel’s “effect” function, identify your inputs and how the equation would look in Excel.

(c-1) What is the future value of $200 after three years under 12% quarterly compounding? (1 point)

(c-2) What is the effective annual rate (EAR) for 12% interest with quarterly compounding? (1 point)

(d-1) What is the future value of $200 after three years under 12% daily compounding? Assume 365 day years and do not do any interim rounding. Just enter the interest rate, divide by 365, hit “=”, then hit your I/Y key (or similar for other calculators). (1 point)

(d-2) What is the effective annual rate for 12% interest with daily compounding? (1 point)

8. Will the effective annual rate ever be equal to the simple (quoted) rate? Explain. (1 point)

9. (a) Assume that you have borrowed $1,000 for 2 years and you have an annual interest rate of 12% (annually compounded). What is the monthly payment due on the loan? (1 point)

(b) Switch gears here and now assume that the payments are made annually. What is the annual interest expense for the borrower, and the annual interest income for the lender, during Year 1? (Hint: Go to the TVM lecture notes for multiple cash flows and go to slide 15.) (1 point)

10. Suppose on January 1 you deposit $200 in an account that pays a quoted interest rate of 11.33% (APR), with interest added (compounded) daily. How much will you have in your account on October 1, or after 9 months? (assume N = 273 days) Recall that the interest rate (I/Y) represents the periodic rate based on how many times per YEAR the interest is compounded. Hint, this is 365 times per year. (1 point)

11. Now suppose you leave your money in the bank for 21 months. Thus, on January 1 you deposit $200 in an account that pays a 11.33% compounded daily. How much will be in your account on October 1 of the following year? (assume N = 638 days) (1 point)

12. Suppose someone offered to sell you a note that calls for a $1,000 payment three years from today. The person offers to sell the note for $850. You have $850 in a bank time deposit (savings instrument) that pays a 6.77% APR with daily compounding; and you plan to leave this money in the bank unless you buy the note. The note is not risky—that is, you are sure it will be paid on schedule. Should you buy the note? Check the decision in two ways:

(a) by comparing your future value (FV) if you buy the note versus leaving your money in the bank (FV of the note is $1000, compare this to the FV of leaving $850 in the bank for 3 years with daily interest compounding, should you buy the note?) (1 point)

(b) by comparing the present value (PV) of the note with your current bank investment (PV of the note is PV of the $1000 payout in 3 years assuming the same daily compounded interest as your bank is paying and the PV of your bank investment is the $850, should you buy the note?) (1 point)

(c) Based on parts (a) and (b), do you buy the note or keep your money in the bank? Be sure to explain your answer. (1 point)

Homework is Completed By:

Writer Writer Name Amount Client Comments & Rating
Instant Homework Helper

ONLINE

Instant Homework Helper

$36

She helped me in last minute in a very reasonable price. She is a lifesaver, I got A+ grade in my homework, I will surely hire her again for my next assignments, Thumbs Up!

Order & Get This Solution Within 3 Hours in $25/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 3 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 6 Hours in $20/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 6 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 12 Hours in $15/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 12 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

6 writers have sent their proposals to do this homework:

Quality Assignments
Assignment Guru
Phd Writer
Solutions Store
Finance Professor
Engineering Mentor
Writer Writer Name Offer Chat
Quality Assignments

ONLINE

Quality Assignments

I am an academic and research writer with having an MBA degree in business and finance. I have written many business reports on several topics and am well aware of all academic referencing styles.

$42 Chat With Writer
Assignment Guru

ONLINE

Assignment Guru

I am an elite class writer with more than 6 years of experience as an academic writer. I will provide you the 100 percent original and plagiarism-free content.

$33 Chat With Writer
Phd Writer

ONLINE

Phd Writer

I am an experienced researcher here with master education. After reading your posting, I feel, you need an expert research writer to complete your project.Thank You

$39 Chat With Writer
Solutions Store

ONLINE

Solutions Store

I am a PhD writer with 10 years of experience. I will be delivering high-quality, plagiarism-free work to you in the minimum amount of time. Waiting for your message.

$15 Chat With Writer
Finance Professor

ONLINE

Finance Professor

I am an academic and research writer with having an MBA degree in business and finance. I have written many business reports on several topics and am well aware of all academic referencing styles.

$44 Chat With Writer
Engineering Mentor

ONLINE

Engineering Mentor

I am a professional and experienced writer and I have written research reports, proposals, essays, thesis and dissertations on a variety of topics.

$34 Chat With Writer

Let our expert academic writers to help you in achieving a+ grades in your homework, assignment, quiz or exam.

Similar Homework Questions

How to find radius of capillary tube - A one strength of the us constitution - Aged care accreditation standards - Coca cola campaign case study - Gts geotechnical testing services - Moods of verbs exercises with answers - Ge iron grip near me - Seismic sea wave crossword - Four leadership styles in situational leadership - Pom software - Unlevered cost of capital - Write an essay about equality - Class diagram for dental clinic management system - One paragraph for an essay - Interagency collaboration and legal searches - Oh say can you see lyrics - What is a comprehensive health assessment in nursing - Inverse time circuit breaker - Harshit saxena and gurpreet kaur - What is the density of aluminum metal - What is the orbital diagram for boron - Partenavia p68c flight manual - Theme for english b discussion questions and answers - Two parallel wires each carrying a current of - Copper chloride aluminum foil - Passion by kathleen raine - Ph of 0.005 m h2so4 - And your name is jonah - Furry friends foundation i creating a new database from scratch - Network diagram critical path - Research Assignment - Todd matchett confessions of a young criminal - Vce unit 3 and 4 physics - Mabel park high school uniform shop - Insights Into Criminal Behavior - Imeon 9.12 hybrid inverter - Agricutlure class - 1993 big bayou canot train wreck victims - Time sert tap size - Annotated Bio-2 - History 1-2 - Cp3 - HW 2 - C11E Assignment 4 - Is flour a pure substance - Current events - Mindtools com pages article leadership style quiz htm - D3 - Algebra 2 final exam - Assignment 2: Part A & B (Only for Kim Woods) Due in 3 days - Practical sharepoint 2013 governance pdf - Sho me led lights - Fulbright corp uses the periodic inventory system - Colman mockler forbes magazine cover - Martín y rodolfo nadan en la piscina. van a nadar en la piscina mañana también. - Research Paper: Server Virtualization - The madoff affair questions and answers - Blue skinned people of kentucky - Buton brandy black label - Pizza hut value chain analysis - 132 148 124 2000 login mobilemis - Psychology - Aluminum hydrogen carbonate formula - Caged bird maya angelou literary devices - Bcg matrix of maruti suzuki - What are the three sources of a unique and valuable strategic position? - Compound miter angle chart - 20c leinster grove brunswick east - A tale of two restaurants case study answers - ISA 562 – 2020 - Kung fu punctuation resources - Teresa granger is the manager of chicago cheese - Chlorsig how to use - Organizational Analysis Wk 2 - Apply: Signature Assignment: Organizational Analysis - Fin 370 week 1 definitions - It outsourcing case study pdf - Computer basics inside a desktop computer - Hard rock cafe operations management in services case study - Type d adverse drug reactions - Lord of the flies chapter 3 quiz - Come play with me train - I need 250 words significant Health and Economic Burden to Society - Erosion and deposition worksheet pdf - Palmolive antibacterial hand soap msds - Retail Marketing - Nestle global strategy case study answers - Carbon dioxide test equation - Gentra puregene blood kit - Spearfishing south west rocks - A worn path bio poem - Assignment - Cask of amontillado essay prompts - Atkinson's flexible firm model - Management concepts and organizational behavior ebook download - Much ado about nothing introduction - Age structure diagram worksheet - 5 pungent plants buddhism - Ellen foster chapter 3 summary - Diploma in life insurance - End of act 5