TVM Problem

TVM Problem - Business Management 301 Day 8 Midterm Exam...

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Unformatted text preview: Business Management 301 Day 8 Midterm Exam Review July 14, 2011 TVM Problems TVM Problems Calculator Tips 1) Match Pmt frequency (PMT) , interest rate (I/YR) , and compounding period (N) . (These three variables must be stated in similar terms and all three move together!) 2) Clear calculator before each problem HP: 2 nd C All; TI: 2 nd CLR TVM 3) Watch “begin” vs. “end” mode (Default for TVM is end mode. Clearing calculator will not change the mode!) TVM Problem Tips Read Question Carefully! Recognize where you are standing in time. Inflows: + Outflows: - CF j : Shortcut for Uneven CF Problems : White keystroke used to backspace Enter info for ALL 5 variables across top of calculator in order to avoid mistakes. (Note: One variable will always be ZERO .) Annuity Question #1 Henrietta and Harrison are twins who turn everything into a competition. Recently, they agreed to enter a competition to see who can acquire the most money in the next 10 years. Henrietta plans to invest $250 at the beginning of each month into an account that pays 6% annually . Harrison is going to invest $250 at the end of each month into an account that pays 6.15% annually . At the end of 10 years , who will have the most money in their account? How much more will he/she have? Annuity Question #1 Henrietta and Harrison are twins who turn everything into a competition. Recently, they agreed to enter a competition to see who can acquire the most money in the next 10 years. Henrietta plans to invest $250 at the beginning of each month into an account that pays 6% annually . Harrison is going to invest $250 at the end of each month into an account that pays 6.15% annually . At the end of 10 years , who will have the most money in their account? How much more will he/she have? Henrietta BEGIN Mode N= 120 [10 x 12 = 120] PMT=-250 I/Yr= 0.5 [6/12 = 0.5] PV=0 FV=? FV: $41,174.69 Harrison END Mode N=120 [10 x 12 = 120] PMT=-250 I/Yr= 0.5125 [6.15/12 = 0.5125] PV=0 FV=? FV: $41,305.07 $41,305.07 – $41,174.69 = $130.38 Annuity Question #2 Isabella is 21, but she knows it is never too early to plan for her retirement. Isabella believes a monthly income of $6500 that will be withdrawn on the first of each month will be sufficient for supporting her retirement lifestyle. Isabella plans to retire at age 65 and live until age 95 . In retirement, Isabella thinks she can earn 3.5% annually on the money she has saved. However, she took a risk profile questionnaire and is an aggressive investor so she believes she can earn an...
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This note was uploaded on 11/17/2011 for the course BUS M 301 taught by Professor Jimbrau during the Summer '11 term at BYU.

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TVM Problem - Business Management 301 Day 8 Midterm Exam...

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