Homework
Time Value of Money
At the end of Chapter 3, do Financial Planning Problems 1, 3, 10.
In addition, do the following problems:
11. Carnival Cruise Lines is offering this great cruise five years from now. If you buy the ticket then, it will cost $4,000. How much would you be willing to pay today for that cruise? Assume an interest rate of 7%. They offer to sell you the ticket now for $3,000. Do you buy now or wait?
12. Your company gave you a pension of $30,000 a year. They now want to buy out that pension for a lump-sum. Assume your pension would go 20 more years and you can get an interest rate of 5%, how much would you want the company to pay you to buy out your pension? They offer you $350,000 to give up your pension, do you take it?
13. You want to have $500,000 when you retire in 12 years. You have $350,500 now. What interest do you need to earn in order to reach your goal?
14. How much money do you need to save each year in order to put a down payment of $100,000 on a house in five years? Assume an interest rate of 7%.
Deliverable:
Word or Excel document with answers to problems.
Grading Rubric:
| A | B | C | D | F | |
| Professionalism | Typed, stapled, no
spelling or grammar errors. Easy to read statements. |
Typed, stapled, no
spelling, minor grammar errors. Easy to read statements. |
Typed, stapled, minor
spelling, grammar errors. Easy to read statements. |
Not stapled, spelling
and grammar errors Statements are not clear. |
Not typed or stapled.
Grammar and spelling errors. Statements are not clear. |
| Problems | 1.
20 pts 3. 20 pts 10. 10 pts 11. 10 pts number, 5 pts decision 12. 10 pts number, 5 pts decision 13. 10 pts 14. 10 pts |