For this assignment, there are 20 short questions. Answer is needed in round figure. The answer instruction is in the assignment file. A formula sheet is attached to solve each short question. Please write the answer in the little box for each question and save it. The file is .Microsoft World .docx file.......... There are some online calculator portal attached as well to calculate.........1) http://www.fncalculator.com/financialcalculator?type=tvmCalculator2) https://www.msn.com/en-us/money/tools/timevalueofmoney3)https://www.calculatorsoup.com/calculators/financial/index-time-value-of-money-calculators.php
TVM Assignment Instructions · The answers to the questions should contain only the following character (no spaces): 0 1 2 3 4 5 6 7 8 9 · The answers should be rounded to two decimal places. · There is no time limit on attempting the quiz (except of course the assignment deadline) and students may submit as many attempts as they wish - only the highest grade achieved will be counted. · Students should be aware of a 30 minute security limitation of blackboard which may affect submission of assignment answers. Please refer to the assignment instruction document found in the folder titled "Assignments" in the course shell for further explanation. · While students are encouraged to discuss questions for peer-support, it is strongly encouraged for individuals to ensure individual comprehension as these formulas represent a way of understanding of how money works – the backbone of financial literacy! QUESTION 1 1. Marina had an accident with her car and the repair bill came to $900. She didn’t have any emergency fund money and no extra money in her monthly budget, so she ended up borrowing from a pay-day loan company. As long as she can pay the loan back at the end of the 30 day period she won’t be charged any interest, technically. However, she did have to pay an $19 processing fee per $100 that she borrowed. If she were to consider the processing fee to represent interest paid in her formula, what would she discover to be the annual interest rate she was charged on her short-term loan? · Hints: · *If our unknown is coming from the right to be isolated on the left, the value moved from left to right, in this case I, is divisible rather than a multiplier · *Remember that t is always represented in years, therefore here you must convert the 30 days into the portion of the year it represents – either 1 month out of 12, or more precisely 30 days out of 365 · *Remember that, just as with the example we covered in the chapter slides, the answer from your calculations must be converted from a decimal to a percentage as the questions is for the percentage. QUESTION 2 1. The end of the month has arrived and Marina was only able to save up $150 to pay off her pay-day loan so far. This means she will have to delay payment on the remaining $750. Besides the delayed payment fee that she is charged, she will now have to pay interest on the remaining amount. The APR (annual percentage rate) is 47%, but the interest is compounded daily. What is the effective interest rate that Marina will actually be paying? · Hints: · *There is only one formula which we would use to convert a basic annual interest rate into one which shows the effect of compound periods QUESTION 3 1. It took her 9 more months but Marina has managed to save the full $750 plus more to cover fees to pay off the pay-day loan company. However, she forgot to account for the interest that had been compounding over time on the loan amount. Consider it is now 275 days later, the remaining loan was $750 and the APR is 47% compounded daily. What is the total amount that Marina must now pay in order to pay off her the loan, accounting for interest? What is the total amount of interest paid (not including fees)? · Hints: · * We know the amount of debt that Marina started with (PV) but we need to find out how much debt she has ended up with (FV) · *There is no mention of payments (PMT) so we know it’s not an annuity formula, but we also see compound periods which means it’s not simple interest either. QUESTION 4 1. Anna wants to travel after graduation but she isn’t working while in school so she won’t be able to put money aside regularly. However, her grandmother gave her the generous gift of $2500 for her birthday and suggested she invest it in a GIC because it’s low risk. She shopped around and found a 4-year GIC investment that earns 2.4% Interest annually. How much will Anna have at the end of her four-year investment? How much interest will be earned? · Hints: · *She is making a one-time payment into her savings, rather than regular payments, therefore it is not an annuity and we will use a lump sum compound interest formula · *we know how much she is beginning with, but we are searching for how much she will end up with, this is the future value (FV) · *there is no payment (PMT) because it is not an annuity · *you could simplify the formula by canceling out n since her interest is only compounded once a year (n=1) QUESTION 5 1. Anna was pretty disappointed with how little money she would have and so she started looking at other investment options that might involve higher risk but would also offer more possible return. Her bank’s financial advisor suggested a mutual fund that she said was only moderately risky but had a record of 9.5% annual return. Assuming the mutual fund preformed as well as it has in the past, how much would Anna’s investment of $2500 potentially be after 4 years if she decided to go with this option? How much interest will be earned? · Hints · *Many of the questions are designed to demonstrate what would happen if we changed only one factor in the formula, in this case the interest rate. The rest of the formula stays the same as the pervious question but we re-calculate to see the impact of this change. QUESTION 6 1. Victor would like to buy his first car and the one he has his eye on is $25,000, plus an extra 13% HST for a total price of $28,250. The dealership has a deal for $0 down payment and charges 2.89% interest on the loan. Victor plans to make car loan payments weekly and has accepted the maximum loan repayment period of 8 years. How much will his weekly care loan payment be? How much will he have paid to the dealership by the time his loan is paid off? How much interest will be paid? · Hints: · *He is paying off debt which means the FV is $0 since he will end up with zero debt when it is paid off. If FV is $0, that means we are working with a PV formula. · *remember that for the purpose of this assignment we assume that compound periods and payment periods are always in sync. This is certainly not always true in life but we haven’t learned the higher-level math that lets us account for these two being different. QUESTION 7 1. Hak Young is tired at the end of the semester and decides he really needs a break so he pays for a one week all-inclusive trip to Disney Land with his credit card. In total the trip cost $3000 and his credit card charges 21% interest compounded monthly. He doesn’t expect that he will have the money to pay off his credit card until he graduates and is working full time which will be at least another 18 months. How much will Hak Young's trip have truly cost him by the time he can start to pay it off? What will be the total interest paid? · Hints: · *we are counting up to a future debt total that we will end up with, therefore we will use a future value (FV) formula to find the total debt he will have in the future · *be careful that the question specifies that he will not be making any payments over this time. That is why we are adding up, rather than subtracting from the total. This is also why there is no payment (PMT) value in the formula, the interest is compounded but there are no regular payments in or out (except for the compounding interest) therefore it is not an annuity · *remember to represent t in years, so here that would either be 18/12 or simply 1.5 QUESTION 8 1. Hak Young has gone on to accumulate other credit card debt on top of what he owes from his Disney Land vacation and his total debit is now $13,864.82. He is getting worried about his debt and is determined to pay it off completely. With all conditions of the account being the same as before, what would Hak Young’s minimum payment have to be in order to pay off his debt in 5 years? What will be the total interest paid? · Hints: · *now we are searching to pay off the debt which means he is making regular payment and therefore we must use an annuity formula · *we know how much debt he has to begin with which is the present value (PV). We also know the future value (FV) is zero – assuming he can pay off his debt. However, in order to determine the payment (PMT) we will count down from the debt he starts with, which means we will use a present value (PV) formula QUESTION 9 1. Hak Young is daunted by that monthly payment amount and is trying to figure out how he can make paying off his loan more manageable. He went to his bank and found out he could get a personal loan that he could then use to pay off his credit card. The personal loan has an interest rate of 9% compounded monthly. Assuming he still planned to pay off his debt in 5 years, what would his monthly payments to the bank be now? What will be the total interest paid? · Hints: · *This question is designed to illustrate what would happen if we decreased the interest rate. The rest of the formula stays the same as the previous question but we re-calculate to see the impact of this change. QUESTION 10 1. By the time Harsh graduated school he had an OSAP loan of $22,000. The interest charged on the loan is about 4.5% which is compounded monthly. Harsh has decided he had better focus on getting the loan paid off as quickly as possible to save paying a lot of extra money in interest. He set for himself the goal of paying off the loan in three years. What would Harsh’s monthly loan payments have to be in order to achieve his goal? What will be the total interest paid? · Hints: · *again, when isolate payment (PMT) by moving it to the left, we must then bring present value (PV) to the right and it becomes divisible rather then a multiplier · * we are working with the present value (PV) because we are counting down from a number that we are beginning with until we reach zero, in order to pay off his debt QUESTION 11 1. Harsh realizes that payment amount is not manageable based on how much he currently makes and all of the other expenses he also has to budget for. As a result he decides paying off his loan in 6 years is simply more realistic. What