Assignment 1

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You submitted this Assignment on Sun 26 Oct 2014 4:11 PM EET. You got a score of 100.00 out of 100.00.

Please read all questions and instructions carefully. Note that you only need to enter answers in terms of numbers and without any symbols (including $, %, commas, etc.). Enter all monetary answers to the nearest dollar (no decimal/cents) and all interest rates to the nearest on hundredth of a percent (two decimal places). Read the syllabus for examples. The points for each question are listed in parentheses at the start of the question, and the total points for the entire assignment add up to 100.

Question 1
(5 points) $100 today is worth the SAME as $100 tomorrow.
Your Answer

Score

Explanation

5.00

Correct. You understand time value

True
False



Total

5.00 / 5.00

Question Explanation
We have assumed that time value of money is positive.

Question 2
(5 points) $100 invested for 10 years at 12% interest is worth more in FV terms than $200 invested for 10 years at 4% interest.
Your Answer
True



Score

Explanation

5.00

Correct. You know the mechanics for calculating FV.

False
Total

5.00 / 5.00

Question Explanation
All about compounding.

Question 3
(5 points) 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? (Enter just the number without the $ sign or a comma)
You entered:
189

Your Answer
189



Total

Score

Explanation

5.00

Correct, You know it has to be less than $200.

5.00 / 5.00

Question Explanation
Simple PV calculation.

Question 4
(10 points) Jeff has $1,000 that he invests in a safe financial instrument expected to return 3% annually. Marge has $500 and invests in a more risky venture that is expected to return 7% annually. Who has more after 20 years? And how much does he/she have in FV terms?
Your Answer