Is FV negative if you lose money on an investment?
> 1. How long is the period of deferral if the first quarterly payment of a deferred ordinary annuity will be paid 3 1 2 years from today? 2. How long is the deferral period if the first quarterly payment of a deferred annuity due will be paid 3 1 2 years
> Calculate the missing values for the promissory notes described. Face value ($) = 4000 Issue date = Nov 30 Interest rate (%) = 8 Term = 75 days Date of Sale = Jan 1 Discount Rate (%) = ? Proceeds = 4015.25
> The term of the lease on a vehicle is about to expire. Answer parts (a) and (b) strictly on financial considerations. 1. If the market value of the vehicle is less than the residual value, what should the lessee do? 2. If the market value of the vehicle
> Calculate the missing values for the promissory notes described. Face value ($) = 9000 Issue date = July 28 Interest rate (%) = 8 Term = 91 days Date of Sale = Sept 1 Discount Rate (%) = ? Proceeds = 9075.40
> An ordinary annuity and an annuity due have the same present value, n, and i. Which annuity has the smaller payment? Give the reason for your answer.
> Calculate the missing values for the promissory notes described. Face value ($) = 3500 Issue date = Oct 25 Interest rate (%) = 10 Term = 120 days Date of Sale = Dec 14 Discount Rate (%) = 8 Proceeds = ?
> An ordinary annuity and an annuity due have the same future value, n, and i. Which annuity has the larger payment? Give the reason for your answer.
> Calculate the missing values for the promissory notes described. Face value ($) = 2700 Issue date = Sept 4 Interest rate (%) = 10 Term = 182 days Date of Sale = Dec 14 Discount Rate (%) = 12 Proceeds = ?
> Solve the equations. x 1.1 2 + 2 x ( 1.1 ) 3 = $1000
> Other factors being equal, is the PV of an annuity due larger if the given nominal discount rate is compounded monthly instead of annually? Explain briefly.
> Calculate the missing values for the promissory notes described. Face value ($) = 6000 Issue date = May 17 Interest rate (%) = 0 Term = 3 months Date of Sale = June 17 Discount Rate (%) = 9 Proceeds =?
> If the periodic interest rate for a payment interval is 3%, by what percentage will PV(due) exceed PV?
> Calculate the missing values for the promissory notes described. Face value ($) = 1000 Issue date = March 30 Interest rate (%) = 0 Term = 50 days Date of Sale = April 8 Discount Rate (%) = 10 Proceeds = ?
> Other things being equal, why is the present value of an annuity due larger than the present value of an ordinary annuity?
> Calculate the missing values for the promissory notes described. Issue date = March 30 Face value ($) = 9400 Term = ? Interest rate (%) = 9.90 Maturity value ($) = 9560.62
> For the present value of an annuity due, where is the focal date located relative to the first payment?
> Calculate the missing values for the promissory notes described. Issue date = Dec 31 Face value ($) = 5200 Term = ? Interest rate (%) = 11.00 Maturity value ($) = 5275.22
> Other things being equal, why is the future value of an annuity due larger than the future value of an ordinary annuity?
> Calculate the missing values for the promissory notes described. Issue date = Nov 5 Face value ($) = 4350 Term = 75 days Interest rate (%) = ? Maturity value ($) = 4445.28
> Solve the equations. 12x − 4x(1.06)4 = $1800
> For the future value of an annuity due, where is the focal date located relative to the final payment?
> Calculate the missing values for the promissory notes described. Issue date = Jan 22 Face value ($) = 6200 Term = 120 days Interest rate (%) = ? Maturity value ($) = 6388.04
> Give three examples of an annuity due.
> Calculate the missing values for the promissory notes described. Issue date = Aug 31 Face value ($) = ? Term = 3 months Interest rate (%) = 7.50 Maturity value ($) = 7644.86
> If you contribute $250 per month to an RRSP instead of $500 per month, will the time required to reach a particular savings target be (pick one): (i) twice as long? (ii) less than twice as long? (iii) more than twice as long? Give the reasoning for your
> Calculate the missing values for the promissory notes described. Issue date = July 3 Face value ($) = ? Term = 90 days Interest rate (%) = 10.20 Maturity value ($) = 2667.57
> If you double the size of the monthly payment you make on a loan, will you pay it off in (pick one): (i) half the time? (ii) less than half the time? (iii) more than half the time? Give the reasoning for your choice.
> Calculate the missing values for the promissory notes described. Issue date = Feb 15 Face value ($) = 3300 Term = 60 days Interest rate (%) = 8.75 Maturity value ($) = ?
> You intend to accumulate $100,000 in 10 years instead of 20 years by making equal monthly investment contributions. Will the monthly contribution for a 10-year plan be: (i) Twice the monthly contribution for a 20-year plan? (ii) Less than twice the month
> Calculate the missing values for the promissory notes described. Issue date = April 30 Face value ($) = 1000 Term = 4 months Interest rate (%) = 9.50 Maturity value ($) = ?
> Solve the equations. ( 1.065 ) 2 x − x 1.065 = $ 35
> Suppose you choose to pay off a loan over 10 years instead of 5 years. The principal and interest rate are the same in both cases. Will the payment for the 10-year term be: (i) Half the payment for the 5-year term? (ii) More than half the payment? (iii)
> Calculate the missing values for the promissory notes described. Issue date = ? Term = 60 days Legal due date = March 1 (leap year)
> Think of a 20-year annuity paying $2000 per month. If prevailing market rates decline over the next year, will the price to purchase a 20-year annuity increase or decrease? Explain.
> Calculate the missing values for the promissory notes described. Issue date = ? Term = 180 days Legal due date = Sept 2
> Suppose the discount rate used to calculate the present value of an annuity is increased (leaving n and PMT unchanged). Will the annuity’s present value be (pick one): (i) larger or (ii) smaller than before? Give a reason for your choice.
> If an ordinary annuity with quarterly payments and a 5 1 2 -year term began June 1, 2020, what are the dates of the first and last payments?
> Calculate the missing values for the promissory notes described. Issue date = ? Term = 9 months Legal due date = Oct 3
> If you pay automobile insurance premiums by monthly pre-authorized chequing, do the payments form an ordinary annuity?
> What is meant by the “term” of an annuity?
> What distinguishes an ordinary simple annuity from an ordinary general annuity?
> Solve the equations. 2 1 − b 1.45 = 5.5 b − 9
> A semiannually compounded nominal rate and a monthly compounded nominal rate have the same effective rate. Which has the larger nominal rate? Explain.
> Is the effective rate of interest ever equal to the nominal interest rate? Explain.
> Is the effective rate of interest ever numerically smaller than the nominal interest rate? Explain.
> What is meant by the effective rate of interest?
> Which investment scenario requires more time: “$1 growing to $2” or “$3 growing to $5”? Both investments earn the same rate of return. Justify your choice.
> Under what circumstance does the value calculated for n equal the number of years in the term of the loan or investment?
> Which scenario had the higher periodic rate of return: “$1 grew to $2” or “$3 grew to $5”? Both investments were for the same length of time at the same compounding frequency. Justify your choice.
> If FV is less than PV, what can you predict about the value for i?
> Why is $100 received today worth more than $100 received at a future date?
> Solve the equations. 10 a 2.2 + ( 2.2 ) 2 = 6 + a ( 2.2 ) 3
> Suppose it took x years for an investment to grow from $100 to $200 at a fixed compound rate of return. How many more years will it take to earn an additional 1. $100? 2. $200? 3. $300? In each case, pick an answer from: (i) more than x years, (ii) f
> For a six-month investment, rank the following interest rates (number one being “most preferred”): 6% per annum simple interest, 6% compounded semiannually, 6% compounded quarterly. Explain your ranking.
> Explain the difference between “nominal rate of interest” and “periodic rate of interest.”
> Explain the difference between “compounding period” and “compounding frequency.”
> What does it mean to compound interest?
> If short-term interest rates do not change, what happens to a particular T-bill’s fair market value as time passes?
> If short-term interest rates have increased during the past week, will investors pay more this week (than last week) for T-bills of the same term and face value? Explain.
> Is the price of a 98-day $100,000 T-bill higher or lower than the price of a 168-day $100,000 T-bill? Why?
> If the interest rate money can earn is revised upward, is today’s economic value of a given stream of future payments higher or lower? Explain. Answer: Today’s economic value is lower. This economic value is the lump amount today that is equivalent to
> We frequently hear a news item that goes something like: “Joe Superstar signed a five-year deal worth $25 million. Under the contract he will be paid $3 million, $4 million, $5 million, $6 million, and $7 million in successive years.” In what respect is
> Solve the equations. 3 .5 x − 1 = 2.5
> What is meant by the “time value of money”?
> How can you determine which of three payments on different dates has the largest economic value?
> Under what circumstance is $100 paid today equivalent to $110 paid one year from now?
> What is meant by “equivalent payments”?
> What effect will each of the following have on a firm’s break-even point? In each case, assume that all other variables remain unchanged. 1. Fixed costs decrease. 2. Variable costs increase. 3. Sales volume increases. 4. Unit selling price decreases. 5.
> Once a business is operating beyond the break-even point, why doesn’t each additional dollar of revenue add a dollar to net income?
> What effect will each of the following have on a product’s unit contribution margin? In each case, assume that all other variables remain unchanged. 1. The business raises the selling price of the product. 2. The prices of some raw materials used in manu
> An item is marked down by the same percentage as the rate of markup on selling price. Will the reduced operating profit be positive, negative, or zero? Explain.
> Suppose an item that originally had a 40% rate of markup on cost is marked down 40%. Is its reduced selling price equal to C? Explain.
> Does a retailer break even if an item is sold at the cost C?
> Solve the equations. x + 2 5 = x + 0.8
> Under what unusual circumstance will the rate of markup on cost equal the rate of markup on selling price?
> Is it possible for the rate of markup on cost to exceed 100%? Explain.
> Is it possible for the rate of markup on selling price to exceed 100%? Explain.
> For a given dollar amount of markup, which will be the larger number: the rate of markup on cost or the rate of markup on selling price? Explain.
> If currency R strengthens relative to currency S, will the exchange rate in terms of units of S per unit of R increase or decrease? Explain.
> If currency G weakens relative to currency H, will the exchange rate in terms of units of G per unit of H increase or decrease? Explain.
> If the exchange rate in terms of units of currency P per unit of currency Q increases, which currency weakened? Explain.
> If the exchange rate in terms of units of currency N per unit of currency M decreases, which currency strengthened? Explain.
> If a series of compound percent changes are all negative, is the overall percent decrease larger or smaller (in magnitude) than the sum of the individual percent changes? Justify your answer.
> If a series of compound percent changes are all positive, is the overall percent increase larger or smaller than the sum of the individual percent changes? Justify your answer.
> Solve the equations. 1.25y – 20.5 = 0.5y – 11.5
> Is it possible for a capital loss to be worse than −100%? Explain or give an example.
> Is it possible for the capital gain yield to exceed 100%? Explain or give an example.
> Can the income yield from an investment be negative? Explain or give an example.
> If the percent rate is 0.01%, what fraction is the portion of the base?
> If the percent rate is 1000%, what multiple is the portion of the base?
> What is the percent rate if a quantity is 1 1000 of the base?
> Evaluate: 0 + 3 × 3 − (32 + 10)
> Evaluate: 12 − 2 × 5 + 22 × 0
> Evaluate: 0 + 3 × 3 − 32 + 10
> Evaluate: 2 × (2 + 4) − 8
> Solve the equations. 3 .1t + 145 = 10 + 7.6t
> The introduction of a new product will require an initial investment of $550,000. The annual profit expected from the new product is forecast to be $100,000 for Years 1 to 3, $70,000 for Years 4 to 6, and $50,000 for Years 7 to 12. Should the firm procee
> Evaluate: (10 + 10) × 0
> Evaluate: 2 × 2 + 4 − 8
> Evaluate 10 + 10 × 0
