Distinguished-level: State the reason for showing both a negative

Distinguished-level: State the reason for showing both a negative

Subject: Business    / Finance
Question

Question 1:

•Proficient-level: “List and describe the purpose of each part of a time line with an initial cash inflow and a future cash outflow. Which cash flows should be negative and which positive?” (Cornett, Adair, and Nofsinger, 2016, p. 95).

•Distinguished-level: State the reason for showing both a negative and positive amount on the time line.

Question 2:

•Proficient-level: “How are the present value and future value related?” (Cornett, Adair, & Nofsinger, 2016, p. 95).

•Distinguished-level: Explain why a dollar is worth more today than a dollar received a year from now.

Question 3:

•Proficient-level: “How are present values affected by changes in interest rates?” (Cornett, Adair, & Nofsinger, 2016, p. 95).

•Distinguished-level: Explain how future values are affected by changes in interest rates.

Question 4:

•Proficient-level: “How much would be in your savings account in 11 years after depositing $150 today, if the bank pays 7 percent per year?” (Cornett, Adair, & Nofsinger, 2016).

?Recalculate the savings account balance, using a 6 percent interest rate, and again, using an 8 percent interest rate.

•Distinguished-level: Describe the relationship between changes in interest rates and the ensuing changes in future values.

Question 5:

•Proficient-level: “A deposit of $350 earns the following interest rates: (a) 8 percent in the first year, (b) 6 percent in the second year, and (c) 5.5 percent in the third year. What would be the third year future value?” (Cornett, Adair, & Nofsinger, 2016).

•Distinguished-level: Explain why the future value is not calculated as the average of the annual interest rates.

Question 6:

•Proficient-level: “Compute the present value of a $850 payment made in 10 years when the discount rate is 12 percent” (Cornett, Adair, & Nofsinger, 2016, p. 96).

?Recalculate the present value, using an 11-percent discount rate, and again, using a 13-percent discount rate.

•Distinguished-level: Describe the relationship between changes in interest rates and the ensuing changes in present values.

Question 7:

•Proficient-level: “What annual rate of return is earned on a $5,000 investment when it grows to $9,500 in five years?” (Cornett, Adair, & Nofsinger, 2016, p. 97).

?Recalculate the rate of return, assuming the growth occurred in four years, and again, assuming the growth occurred in six years.

•Distinguished-level: Describe the relationship between changes in the amount of time and the changes in annual rate of return.

Question 8:

•Proficient-level: 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?

•Distinguished-level: State why a borrower would prefer more, or less, frequent compounding periods.

Question 9:

•Proficient-level: What is an amortization schedule, and what are some of its uses?

•Distinguished-level: Explain why more interest is incurred at the beginning of the amortization period than at the end of the amortization period.

Question 10:

•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, p. 123).

•Distinguished-level: Explain why the tax benefit of interest is even larger for longer-term loans?

Question 11:

•Proficient-level: What is the difference between an ordinary annuity and an annuity due?

•Distinguished-level: Explain why the future value of an annuity due is greater than the future value of an ordinary annuity.

Question 12:

•Proficient-level: “What is the future value of a $900 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.

•Distinguished-level: Describe the relationship between changes in interest rates and the ensuing changes in future values.

Question 13:

•Proficient-level: “What is the present value of a $700 annuity payment over six years if interest rates are 10 percent?” (Cornett, Adair, & Nofsinger, 2016, p. 123).

?Recalculate the present value at 9 percent interest, and again, at 11 percent interest.

•Distinguished-level: Describe the relationship between changes in interest rates and the ensuing changes in present values.`