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Bus3062-al-u02d1 sb(unit2)-section 1 2 3 And 4 (Example)

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BUS3062-AL-U02D1 SB (UNIT2)-SECTION #4 Student’s name: Institutional affiliation: Answer 1 Proficient The preference is the savings account where interest is compounded on a monthly basis since the amount on the basis of which interest is earned will grow at a faster rate. As a result interest earned will be more as well as the total amount saved. Distinguished In the case of a borrower frequent compounding periods will create higher interest and consequently increase the debt owed CITATION MFi \l 1033 (Cornett Adair & Nofsinger 2016). As a result the best decision would be less frequent compounding periods – (1 + 0.09) ^-6]/ 0.09 PVA = $800 *(1 – 0.5963)/ 0.09 PVA = $800 * 4.4859 = $3 588.72 At 11% it will be PVA = $800 * [1 – (1 + 0.11) ^-6]/ 0.11 PVA = $800 *(1 – 0.5346)/ 0.11 PVA = $800 * 4.2305 = $3 384.40 Distinguished When there is a decrease in interest rate the present value increases. The calculation further indicates that when there is an increase in the interest rate the present value decreases. Reference BIBLIOGRAPHY Cornett M. Adair T. & Nofsinger J. (2016). M: Finance. New York: McGraw-Hill. [...]

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DUE DATE FEB 20TH 2018 PLEASE DO SECTION-#1,2,3, AND 4 SECTION-#1 The Power—or Curse—of Compounding Review the Discussion Participation Scoring Guide. Chapter 4 in the M: Finance textbook by Cornett, Adair, and Nofsinger provides an introduction to the main concepts of the time value of money for a single cash flow amount. These concepts are important in finance, because cash flows analyzed in most of finance occur at various periods of time, and adjustments to the cash flow's value need to be recognized. Review Chapter 4, with particular emphasis on the "Organizing Cash Flows" and "Future Values" sections of this chapter. For this discussion post, answer the following questions: 1. Would you prefer to have $100 today or $100 one year from now? Why? 2. How can compounding build wealth over time? 3. How can compounding increase debt over time? 4. Based on your responses to Questions 2 and 3, how can compounding both build wealth and increase debt? Is compounding a power or a curse? SECTION-#2-Response Guidelines TWO DISCUSSIONS Read your peers' initial discussion posts and respond to at least two of them. Compare your post to those of your peers and note any differences. Explain why you agree or disagree with your peers' views and analyses. Your responses are expected to be substantive in nature and should reference the assigned readings or other professional literature, as applicable, to support your views. Resources • Discussion and Participation Scoring Guide. SECTION- #3-U02A1-Time Value of Money: Single Cash Flows Introduction Time value of money (TVM) is the foundation of mathematical finance. This assignment is designed to show you how the TVM concept can be applied to corporate finance, as well as to personal finances. You will also learn various technical terms used in finance, such as discount rate, present value, and future value. 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. • Question 1: o Proficient-level: "List and describe the purpose of each part of a time line including the initial cash inflow and the future cash outflow." (Cornett, Adair, and Nofsinger, 2016). o Distinguished-level: "Which cash flows should be negative and which positive?" (Cornett, Adair, and Nofsinger, 2016). • Question 2: o Proficient-level: "How are the present value and future value related?" (Cornett, Adair, & Nofsinger, 2016). o Distinguished-level: Using time value of money concepts, explain why a dollar received today is worth more than a dollar received a year from now. • Question 3: o Proficient-level: "How are future values affected by changes in interest rates; i.e., is there a direct (positive) or inverse effect on future values given a change in the interest rate?" o Distinguished-level: "How are present values affected by changes in interest rates; i.e., is there a direct (positive) or inverse effect on present values given a change in the interest rate?" (Cornett, Adair, & Nofsinger, 2016). • Question 4: o Proficient-level: "How much would be in your savings account in 11 years after depositing $150 today, if the bank pays 5 percent per year?" (Cornett, Adair, & Nofsinger, 2016).  Recalculate the savings account balance, using a 4 percent interest rate, and again, using an 6 percent interest rate. o Distinguished-level: Describe the relationship between changes in interest rates and the ensuing changes in future values. • Question 5: o Proficient-level: "A deposit of $350 earns the following interest rates: (a) 4 percent in the first year, (b) 5 percent in the second year, and (c) 6 percent in the third year. What would be the third year future value?" (Cornett, Adair, & Nofsinger, 2016). o Distinguished-level: Explain why the future value is not calculated as the average of the annual interest rates. • Question 6: o Proficient-level: "Compute the present value of a $850 payment made in 10 years when the discount rate is 8 percent." (Cornett, Adair, & Nofsinger, 2016).  Recalculate the present value, using an 7-percent discount rate, and again, using a 9-percent discount rate. o Distinguished-level: Describe the relationship between changes in interest rates and the ensuing changes in present values. • Question 7: o Proficient-level: "What annual rate of return is earned on a $5,000 investment when it grows to $9,500 in nine years?" (Cornett, Adair, & Nofsinger, 2016).  Recalculate the rate of return, assuming the growth occurred in eight years, and again, assuming the growth occurred in ten years. o Distinguished-level: Describe the relationship between changes in the amount of time and the changes in annual rate of return. Submit your completed assignment as an attachment in the assignment area. You may use either a Word document or an Excel spreadsheet for your work, but not both. Prior to submitting your assignment, review the Time Value of Money: Single Cash Flows Scoring Guide to ensure you have met all of the requirements and as a self-assessment of your work. Reference Cornett, M. M., Adair, T. A., & Nofsinger J. (2016). M: Finance (3rd ed.). New York, NY: McGraw-Hill. Resources [u02a2] Unit 2 Assignment 2 SECTION-#4-U02A2-Time Value of Money: Annuity Cash Flows Introduction In the previous assignment, you learned about the TVM concept as applied to single cash flow. However, in real life you come across financial applications that require multiple or annuity cash flows. In this assignment, you will apply the TVM concept to annuity cash flows; for example, how to amortize a mortgage or car loan. 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. • Question 1: o Proficient-level: Given the same annual interest rate, 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? o Distinguished-level: Given the same annual interest rate, would a borrower prefer more frequent, or less frequent, compounding periods? Why? • Question 2: o Proficient-level: What is an amortization schedule, and what are some of its uses? o Distinguished-level: Explain why more interest is incurred at the beginning of the amortization period than at the end of the amortization period. • Question 3: o Proficient-level: "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, 2016). o Distinguished-level: Explain why the tax benefit of interest is even larger for longer-term loans? • Question 4: o Proficient-level: What is the difference between an ordinary annuity and an annuity due? o Distinguished-level: Explain why the future value of an annuity due is greater than the future value of an ordinary annuity. • Question 5: o Proficient-level: "What is the future value of a $1,000 annuity payment over five years if interest rates are 9 percent?" (Cornett, Adair, & Nofsinger, 2016).  Recalculate the future value at 8 percent interest, and again, at 10 percent interest. o Distinguished-level: Describe the relationship between changes in interest rates and the ensuing changes in future values. • Question 6: o Proficient-level: "What is the present value of a $800 annuity payment over six years if interest rates are 10 percent?" (Cornett, Adair, & Nofsinger, 2016).  Recalculate the present value at 9 percent interest, and again, at 11 percent interest. o Distinguished-level: Describe the relationship between changes in interest rates and the ensuing changes in present values. Submit your completed assignment as an attachment in the assignment area. You may use either a Word document or an Excel spreadsheet for your work, but not both. Prior to submitting your assignment, review the Time Value of Money: Annuity Cash Flows Scoring Guide to ensure you have met all of the requirements and as a self-assessment of your work. Reference Cornett, M. M., Adair, T. A., & Nofsinger J. (2016). M: Finance (3rd ed.). New York, NY: McGraw-Hill. Resources • Time Value of Money: Annuity Cash Flows Scoring Guide.

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