# Progress, democracy and emancipation

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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: 189 Correct, You know it has to be less than \$200. Simple UP calculation. Question 4 (10 points) Jeff has \$1 ,OHO 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 IF terms? Your Answer

Jeff; 1935 Marge; 1935 10. 00 Correct. You know how to calculate Fps! Marge; 1806 Jeff; 1604 Marge; 1604 Jeff; 1806 10. 00 / 10. 00 IF calculations of simple one-shot cash flows. Shows power of compounding. Question 5 (10 points) Your dad invested \$25 for you 70 years ago in a fund and you have not withdrawn any money since.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 without the \$ sign or a comma) Answer for Question 5 5465 Correct.

You know how to accurately calculate IF. Simple IF calculation. The amount has to be at least \$165 even if you ignore compounding because so many years have passed. Question 6 (10 points) Cindy and Jennifer are twin sisters. They both have a \$1 0,000 investment earning 7%. Cindy withdraws \$2,000 of her money now and goes on a shopping spree. Jennifer keeps all her money invested. After 15 years, when each are looking for money to put a down payment on a house, how much more does Jennifer have? (Enter just the number without the \$ sign or a comma; round to he nearest whole dollar. Answer for Question 6 5518 Correct, you know how to calculate the difference in two Eves or figured out that only one IF need to be calculated in this specific case. Total Difference in Future Values or future value of a difference? Question 7 (10 points) Joe is getting ready to buy a car. He has \$20,000 in investments earning 4. 9% annually. The car also costs \$20,000. If he doesn’t pay cash for the car, Joe can get a loan at 2. 9% interest for 5 years. The loan is structured so that Joe pays one balloon payment at the end of 5 years.

The balloon payment includes the principal plus all interest accrued over 5 years. If Joe takes the loan will he have enough money available from his investments to make the balloon payment? How much will he be short/have to spare? Your Answer yes; 2331 Correct decision and correct calculation. Yes; 2082 No; 5404 No; 2331 No; 2082 yes; 5404 How to properly calculate the difference in two future values. Question 8 (15 points) Ralph knows that he is going to have to replace his roof soon. If he has the roof replaced now, it will cost \$10,000.

He could wait 5 years, but it will then cost him \$20,000. At what rate will these options cost the same. This is also known as the break-even point. Exact calculation up to two decimals is not difficult. If stuck, trial and error will help. (Enter the answer with no more nor less than two decimal places, and leave off the % sign. For example, if your answer is 13. 97% you should enter it as 13. 97 NOT O. 14 nor 14) Answer for Question 8 14,87 15. 00 Correct. This is just by trial and error. You can solve using fifth root to get exact solution.. Total 15. 00 / 15. 00

This is UP or IF problem, depending on how you solve it. Exact calculation is not difficult. For those using excel, it is easiest to use the goal seek function in the data tab. Question 9 (15 points) Rondo is in the market for a new car. He has narrowed his search down to 2 models. Model A costs \$32,000 and Model B costs \$28,000. With both cars he plans to pay cash and own them for 4 years before trading in for a new car. His research indicates that the trade in value for Model A after 4 years is of the initial purchase price, while the trade in value for Model B is 45%.

The interest rate is 5%. For simplicity assume that operating and maintenance costs for the models are identical. Which model is the better decision and how much “cheaper” is it than the alternative? Your Answer Model A; 1430 Right decision, and right calculation based on net costs. Model A; 1257 Model B; 1207 Model B; 1430 Model B; 4000 Model A; 4000 15. 00/ 15. 00 Question 10 (15 points) College tuition has been rising at a rate of 7% per year. Currently the average tuition of a state college is \$9,500/year. Andresen’s son Tremor will begin allege in 12 years.

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