Homework answers / question archive / Finance, Information Systems, & Management Science ASSIGNMENT #1 Total Marks: 24 Instructions: Complete the following: Student Name: Student Number: The student affirms that This assignment is of my own work

Finance, Information Systems, & Management Science ASSIGNMENT #1 Total Marks: 24 Instructions: Complete the following: Student Name: Student Number: The student affirms that This assignment is of my own work

Economics

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Finance, Information Systems, & Management Science ASSIGNMENT #1 Total Marks: 24 Instructions: Complete the following: Student Name: Student Number: The student affirms that This assignment is of my own work. I have acknowledged source material through proper citations or references. Signature: Date: Use this assignment as a template and submit the completed assignment in a word document. The use of other applications may make your submission un-readable for the markers and you will receive a mark of 0. DO NOT PDF the document. It would be helpful to use Microsoft Equation (located in the INSERT TAB and on the right side of the function bar. This is application that was introduced in CSSY1225 and you should know how to use the application.) Submit the assignment in the appropriate drop box. There are no alternatives so do not be late. Question Marks 1 2 2 6 3 8 4 8 Total 24 Problems Problem 1 (2 marks) Your parents have promised to give you $175,000 in 50 years. Sounds great! However, if current interest rates suggested for discounting are 14 percent, what is the present value of your future “pot of gold”? Show your work! 1 Problem 2 (6 marks) You have been offered a settlement from a court case. You options are as follows: a. Cash settlement of $155,000 today. b. Offered $18,000 per year for the next 20 years with payments occurring at the end of the year and interest rates are expected to be 10 percent. c. Offered $18,000 per year for the next 20 years with the first payment occurring today and interest rates are expected to be 10 percent. Which offer should be accepted? Why? (Show your work) Problem 3 (8 marks) Consider the following cash flows: Period Cash Flow 1 5,000 2 3,000 3 2,000 4 4,000 a) If the interest rate is 9%, what is the present value of the cash flow stream if the cash flows occur at the end of the period? (Show your work) (2 marks) b) If the interest rate is 9%, what is the present value of the cash flow stream if the cash flows occur at the beginning of the period? (Show your work) (2 marks) c) If the interest rate is 9%, what is the future value of the cash flow stream if the cash flows occur at the end of the period? (2 marks) d) If the interest rate is 9%, what is the future value of the cash flow stream if the cash flows occur at the beginning of the period? (2 marks) Problem 4. (8 marks) Mary is considering the purchase of a new car after graduation. At the local dealership, Mary found her dream car, a brand new Fortwo. The car had a price tag of $20,000 and the dealership was able to offer her a choice of financing packages for her consideration. Option 1. $2,000 rebate from the factory. The rebate will be deducted from the purchase price; however, Mary will be required to arrange financing at the local bank on a 4 year loan with an 8% interest rate and monthly payments. Option 2. 2.9% financing on the purchase price. The financing through the dealership will require monthly payments for the next 4 years. Should Mary take the $2,000 rebate and arrange financing or accept the 2.9% financing? Explain your recommendation! Show your work!