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Fundamentals Of Financial Planning 3rd Edition Michael A Dalton, Joseph Gillice - Solutions
Calculate present by you of an annuity due.
Calculate the future value of an ordinary annuity.
Calculate the future value of an annuity due.
Differentiate the future value of an ordinary annuity versus an annuity due.
Solve a time value of money problem for i, PV, N, PMT, or FV.
Solve time value of money problems using uneven cash flows.
Calculate NPV.
Calculate IRR.
Calculate the inflation adjusted rate of return.
Calculate serial payments.
Prepare and amortization schedule.
Apply time value of money concepts to financing and mortgages.
Calculate present value and future value of single amounts, annuities, annuities due, uneven cash flows and serial payments.*
Calculate amortization payments and annual savings required to meet a goal.*
Calculate NPV and IRR and be able to apply the techniques to financial planning problems.
Define time value of money.
Discuss the difference between the present value and the future value of money.
List and define the four steps to solving time value of money calculations.
Define the future value of a lump-sum amount.
Discuss the difference between ordinary annuity and annuity due.
Define present value of an ordinary annuity.
Define the present value of an annuity due.
Define the future value of an ordinary annuity.
Define the future value of an annuity due.
Distinguish between an ordinary annuity payment with a lump-sum deposit versus an annuity due payment with a lump-sum deposit.
Define Net present Value (NPV).
Define Internal Rate of Return (IRR).
Define an inflation adjusted rate of return.
Define a serial payment.
Define what an amortization schedule illustrates.
List and define the three methods used for the retirement funding calculation.
List applications other than education, retirement funding, mortgages, and loans for TVM.
Identify some of the questions that financial planners are able to answer using time value of money concepts.
Identify the four steps approach to solv- ing a time value of money calculation.
Define positive inflows and negative outflows used on a timeline and in TVM calculations.
Examples of inflows on a timeline include payments of education tuition and repayments of debt.a. Trueb. False
The four steps of solving time value of money problems include creating a timeline, writing down TVM values, clearing calculator registers, and popu- lating the appropriate variables.a. Trueb. False
Distinguish between present value and future value of a lump-sum deposit and that of an annuity.
The present value of a future amount is the value of a present lump-sum deposit after earning interest over a period of time.a. Trueb. False
An annuity due occurs when the timing of the payment is at the end of a period (e.g., end of month, end of quarter, end of year). Truea. b. False
Identify the methods for solving uneven cash flows, net present value, and IRR.
Define an inflation adjusted rate of return and determine its use.
Distinguish between serial payments and annuity payments.
Uneven cash flows are periodic cash flows that are not the same dollar amount.a. Trueb. False
NPV measures the excess or shortfall of cash flows based on the discounted pres- ent value of future cash flows (less the initial cost/investment).a. Trueb. False
IRR is the calculation of the simple interest annual rate of return.a. Trueb. False
Steve and his wife Christine recently opened an investment account with the intention of saving enough to purchase a house. Their goal is to have $45,000 for a down payment in 5 years. Their account will guarantee them a return of 8% compounded annually. How much do they need to put into the
Jordan invested $12,500 to help her friend Dylan start his own cooking school five years ago. The business proved to be successful far beyond Dylan’s expectations. Today he is returning a check to Jordan and has told her that as best as he could figure, she was receiving the equivalent of about
Colleen’s grandfather set up a savings account for her with a $25,000 gift when she was first born. The account accumulated interest annually at a rate of 6% per year and no other deposits were made to the account. Colleen is 21 years old today. ‘To date, how much has accumulated in Colleen’s
DRI Enterprises needs to have a lump-sum deposit of $200,000 for the purchase of a surety bond in 6 months. They wish to immediately deposit a sum of cash into a short-term account paying 4% per year, compounded on a monthly basis. How much will they need to deposit into this account to have enough
Claire just won the lottery and has been told that she can either accept annual payments at the beginning of each year of $173,695 per year for the next 20 years or she can receive a lump-sum settlement. Claire figures she could invest the money at 6.34% (the same rate as the annuity). What would
Mark and Sonya would like to have the opportunity to buy a home in the next five years. They currently have $15,000 saved toward this goal in an investment account paying 7% annual interest, compounded on a monthly basis. In addition to this, Mark and Sonya add an additional $250 every month at the
Alberto saved enough tip money from working at the casino to place $125,500 in an investment account generating 9.25% compounded monthly. He wants to collect a monthly income of $1,350, at the beginning of each month, for as long as the money lasts. Approximately, how many months will Alberto have
David purchased stock 15 years ago for $325.75. He sold the stock today for $2,500.Given this information, what is the average annual compound rate of return that David realized on this stock?a. 10.09%.b. 12.39%.c. 13.12%d. 14.55%.
Kelly has asked her accountant, Darla, to determine whether her company, Gaggin Industries, a leader in chain manufacturing, should purchase a new machine for$155,000 that can be sold at the end of 5 years for $125,000 and during that time will generate cash flows as follows: Year 1) + 4,000; Year
Donna plans to save for a vacation to Costa Rica in 18 months. She will be putting the money into a short-term investment account earning 4% annually. How much will Donna have to put away at the beginning of each month if the total package cost for the trip is $3,500?a. $170.34.b. $188.37.c.
Liam bought a piece of equipment for $10,000. He paid $3,000 for upgrades during year 1 and the equipment generates $2,000 in cash flow for year 1.In year 2 the equipment generated $3,000 and in year 3 it generated $4,000, but Liam sells it for$6,000 and pays a $500 commission. What is his IRR?a.
With interest rates at 4.875% for a 30-year fixed mortgage, Dan, age 48, plans to buy a house for $825,000. He wants to put half of the purchase price down. What will his monthly mortgage payment be for principal and interest?a. $2,182.98;b. $2,768.55.c. $33,176.43:d. $3,493.67.
Bobby bought a house for $275,000, by putting 15% down and borrowing the balance. His note is for 30 years at 7.5% interest. If his first payment is due August Ist of the current year, how much interest will he pay this year?a. $5,98.11b. $6,989.46.c. $7,293.78:d. $7,667.13
Bobby bought a house for $275,000, by putting 15% down and borrowing the rest.His note is for 30 years at 7.5% interest. If his first payment is due August Ist of the current year, how much principal did he pay in the current year?a. $878.29:b. $925.14.c. $985.43.d. $1,612.28.
Cindy won the California lottery. She can take a single lump-sum payout of $12.5 million dollars or receive $825,000 per year for the next 25 years. What rate of return would Cindy need to break even if she took the lump-sum amount instead of the annuity?a. 3.75%.b. 4.29%.c. 4.98%.d. 5.31%.
Danny buys a house for $500,000, putting 20% down. His loan is for 30 years at 6%and he includes closing costs of 3% into his mortgage. How much is his monthly payment (rounded to whole dollars)?a. $2,457.b. $2,470.c. $2.754,d. $2,785.
Frank and Stephanie have an 18 year old son who is going to college this year, for four years. The tuition is $15,000 per year and is expected to increase at 4% per year. They believe they can earn 6% per year on their investment, what lump-sum amount must they deposit today, to pay for their
In five years, Joe wants to buy a boat that costs $75,000 in today’s dollars. He can earn 8% return on his investments and he expects the boat to increase in price by 3% each year. What will Joe’s serial payment at the end of the second year be, if he wants to buy the boat in 5 years?a.
Calculate the present value of $3 million to be received in 30 years assuming an annual interest rate of 10%.
Calculate the present value of $75,000 to be received in 20 years assuming an annual interest rate of 8%.
Calculate the present value of $10,000 to be received in 10 years assuming an annual interest rate of 6%.
Calculate the present value of $50,000 to be received in 5 years assuming an annual interest rate of 8%, compounded monthly.
Calculate the present value of $200,000 to be received in 7 years assuming an annual interest rate of 12%, compounded monthly.
Calculate the present value of $300,000 to be received in 10 years assuming an annual interest rate of 6%, compounded monthly.
Calculate the future value of $10,000 invested for 30 years assuming an annual interest rate of 8%.
Calculate the future value of $15,000 invested for 10 years assuming an annual interest rate of 8%.
Calculate the future value of $5,000 invested for 10 years assuming an annual interest rate of 15%.
Calculate the future value of $24,000 invested for 12 years assuming an annual interest rate of 18%, compounded monthly.
Calculate the future value of $3,000 invested for 50 years assuming an annual interest rate of 12%, compounded monthly.
Calculate the future value of $8,000 invested for 360 months assuming an annual interest rate of 11%, compounded monthly.
Calculate the present value of an ordinary annuity of $5,000 received annually for 7 years assuming a discount rate of 8%.
Calculate the present value of an ordinary annuity of $10,000 received quarterly for 20 years assuming a discount rate of 9%.
Calculate the present value of an ordinary annuity of $3,000 received monthly for 12 years assuming a discount rate of 10%.
Calculate the present value of an annuity of $300,000 received annually that begins today and continues for 10 years, assuming a discount rate of 9%.
Calculate the present value of an annuity of $5,000 received quarterly that begins today and continues for 20 years, assuming a discount rate of 8%.
Calculate the present value of an annuity of $12,000 received monthly that begins today and continues for 25 years, assuming a discount rate of 6%.
Calculate the future value of an ordinary annuity of $6,500 paid annually for 23 years, assuming an annual earnings rate of 6%.
Calculate the future value of an ordinary annuity of $5,000 paid every quarter for 20 years, assuming an annual earnings rate of 8%.
Calculate the future value of an ordinary annuity of $3,000 paid every month for 25 years, assuming an annual earnings rate of 10%.
Calculate the future value of an annual annuity of $1,500 beginning today and continuing for 10 years, assuming an earnings rate of 6%.
Calculate the future value of a quarterly annuity of $3,000 beginning today and continuing for 15 years, assuming an annual earnings rate of 8%.
Calculate the future value of a monthly annuity of $150 beginning today and continuing for 100 years, assuming an annual earnings rate of 12%.
Calculate the annual payment that can be received over 30 years from a single investment of $1,000,000 earning 7%, compounded annually.
Calculate the quarterly payment to be received over 10 years from a single investment of $50,000 earning 12%, compounded quarterly.
Calculate the monthly payment to be received over 15 years from a single investment of$250,000 earning 9.2%, compounded monthly.
Calculate the payment to be received at the beginning of each year for 5 years from an investment of $250,000 earning 6%, compounded annually.
Calculate the monthly payment for a home loan of $400,000 financed at 4% over 30 years.
Calculate the NPV of a machine which is bought for $5,000, sold at the end of year 5 for $2,500.00, and produces the following cash flows: year 1) +$700; year 2) +$600;year 3) +$500; year 4) +$400; year 5) +$300, assume the cost of capital is 8%.
Calculate the IRR of a project that requires an initial cash outflow of $9,000.00 and will be sold at the end of year 5 for $4,500.00. The project produces the following cash flows:Year 1: +$300 Year 2: +$600 Year 3: +$1,200 Year 4: +$2,400 Year 5: +$4,800
Calculate the number of years it will take $5,000 to grow to $25,000 assuming an annual rate of return of 12%.
Today Brian purchased an antique car for $15,000. He expects it to increase in value at a rate of 7% compounded annually for the next 10 years. How much does he expect the car to be worth at the end of the 10th year?
List and define the eight approaches to financial planning analysis and recommendations.
List the three phases of the life cycle approach.
What are some of the questions that an income statement pie chart will answer?
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