FIN 420 Week 3 DQ 1
1 Carla Lopez deposits $ 2,500 a year into her retirement account. If these funds have an average earning of 8 percent over the 40 years until her retirement, what will be the value of her retirement account? 2 An ATM with a service fee of $ 2 is used by a person 100 times in a year. What would be the future value in 10 years( use a 3 percent rate) of the annual amount paid in ATM fees? 3 If a person spends $ 10 a week on coffee( assume $ 500 a year), what would be the future value of that amount over 10 years if the funds were deposited in an account earning 3 percent? 4 A financial company that advertises on television will pay you $ 60,000 now for annual payments of $ 10,000 that you are expected to receive for a legal settlement over the next 10 years. What is the present value of this assuming the time value of the money at 10 %? 5 Brenda plans to reduce her saving( that is, she will spend more) by $ 50 a month. What would be the foregone future value of this reduced saving over the next 10 years?( Assume monthly cash flows, and an annual interest rate of 4 percent.) ===================================================
FIN 420 Week 3 DQ 1
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Evaluate your personal risk tolerance using Exhibit 11-2 A Quick Test to Measure Investment Risk in Ch. 11 of Focus on Personal Finance. Based on your results, were you considered more conservative or less conservative? What factors affected your investment choices? Consider a friend or family member who is more conservative or less conservative than you. How do their money management behaviors differ from your own? ===================================================