Assignment 1 4099 2011

Assignment 1 4099 2011 - Individual Hand-in Assignment # 1...

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Individual Hand-in Assignment # 1 Business 4099 WA Winter, 2011 A PPLIED P ROBLEMS IN P ERSONAL F INANCIAL P LANNING Section 1 – Time Value of Money Applications Question 1.1 – Time Required to Save for a Financial Goal Carrie, age 25 has a current savings balance of $500.25. She hopes to save enough for a $10,000 down payment on her dream automobile, an Acura MDX. Assume she can earn a rate of return of 4% compounded quarterly on her savings. Because she has a limited income and expenses to match, she doesn’t expect to save any additional money in the next ten years. a. How long will it take for her current savings to grow to $10,000? How old will Carrie be when she has accumulated enough for her target downpayment? b. Assuming she changes her investment strategy so that she can expect to earn a rate of return of 6% compounded semi-annually, calculate the time it will take for her money to grow to $10,000. Use MS Equation to demonstrate the formula you used as well as the solution to each question. Question 1.2 – Effective Annual Rates of Return Alex Weng has decided he wants to buy a new Ford F150 with the new 6 cylinder eco-boost engine that promises greater torque and horsepower than the standard V8 but at a fraction of the fuel consumption. His local dealer has ordered his custom-ordered Harley Davidson version of the truck which will cost him $67,450 after all taxes, licensing, add-ons (tonneau cover, mud flaps, floor mats, chrome handles, GPS, Sirius Satellite and other amenities) and delivery charges are factored in. He has placed a $10,000 cash down-payment on the total purchase price. Ford Credit will offer him financing on the balance outstanding at a monthly quoted rate of 1.7% APR on a 36 month fixed rate car loan. He has approached his personal banker at his local branch of the Royal Bank and was quoted a car loan rate of Instructions: ± Follow all instructions given in the course outline regarding hand-in assignments. ± Be sure to follow the additional instructions pertaining to each question. ± This assignment is due no later than 4:00 pm on Tuesday, March 22, 2011. ± You can submit your report to your instructor prior to the submission deadline at any one of the regular classes in the course or leave in the Faculty of Business Main Office in the Ryan Building. ASSIGNMENTS SLIPPED UNDER OFFICE DOORS SHALL NOT BE GRADED. ± Your statutory declaration must be both signed and dated. ± Be sure to forward the electronic version of the assignment using the proper file-naming conventions prior to the due date. ± Point-form responses are not allowed. Use full sentences and paragraphs when introducing, discussing or answering the questions. ± Proof-read your work. Your total grade on your assignment will be reduced because of spelling, grammatical or formatting errors.
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Applied Problems in Personal Financial Planning Individual Hand-in Assignment # 1 Business 4099 – Personal Financial Planning Page 2 7.75% compounded semi-annually over 36 months. Again, the Royal Bank is willing to finance the remaining balance just like Ford Credit.
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This document was uploaded on 03/14/2011.

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Assignment 1 4099 2011 - Individual Hand-in Assignment # 1...

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