Assignment 1 - Finance

Question 1
(5 points) $50 today is worth MORE than $50 tomorrow.
Your Answer Score Explanation
True Correct 5.00 Correct. You understand Time value of money.
False
Total 5.00 / 5.00
Question Explanation

We have assumed 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 Score Explanation
True Correct 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)
Answer for Question 3
You entered:

Your Answer Score Explanation
189 Correct 5.00 Correct, You know it has to be less than $200.
Total 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 Score Explanation
Jeff; 1806
Jeff; 1935
Jeff; 1604
Marge; 1935 Correct 10.00 Correct. You know how to calculate FVs!
Marge; 1604
Marge; 1806
Total 10.00 / 10.00
Question Explanation

FV calculations of simple one-shot cash flows. Shows power of compounding.
Question 5
(10 points) Your dad invested $25 for you in 1942 in a fund and you have not withdrawn any money since.If the fund has averaged a return of 8 percent over the last 70 years, what is the current value of that investment? (Round to the nearest whole dollar; enter just the number