# Business & Finance homework help

Hello finance enthousiasts,

Please find, bellow, our FNCE 623 Quiz 1. This simple quiz focuses on the application the Time Value of Money in real life situations.

To fit your answers in 3 pages, as indicated in a previous e-mail, we opted for simple examples which require simple numerical calculations augmented by a few sentences of explanations. This should be easy for you.

Date to hand in the Quiz: Tuesday, August 11, 23:59

Delivery mode: TurnitIn placeholder

Enjoy it and good luck,

Mike Benke

Question 1( 1 point) : A Vancouver home renovation firm has quoted a price of $9,800 to fix Mike’s back yard.

Five years ago, Mike left $7,500 in an account that has earned an average of 5.25% per year.

Does Mike have enough money in that account for the back yard fix-up? Please show and explain your calculations.

Question 2 (2 point) : In 1867, the US Secretary of State purchased Alaska from Russia for $7,200,000 (about two cents per acre).

At the time, the deal was considered a folly (i.e. crazy) but from our perspective today, did the US Secretary of State get a bargain?

What would it cost in 2007 if Alaska was in exactly the same condition as it was 140 years before and the prevailing interest rate over the 140 years was 4%.

Please show and explain your calculations

Please comment on the US President’s, Donald J Trump, offer to purchase Groenlad? What should be the price offering? What would be the value of that deal in 40 years?

Question 3 (1 point) : Bob, a university student, needs to borrow $5,000 for his tuition bill. He agrees to pay back the loan in one lump-sum payment five years from from now, after he is out of school. The bank says that the payment has to be $7,012.76 If Bob borrows the $5,000 from the bank, what interest rate is he paying on his loan? Please show and explain your calculations.

Question 4 (1 point) : Jack and Jill determined that upon retirement they will need to withdraw $50,000 annually, at the end of each year for the rest of the next 30 years. They know that they can earn 4% each year on their investment.

How much need Jack and Jill in their retirement account ( at the beginning of their retirement) to generate this future cash flow?

Please show and explain your calculations.

Hint: What is the present value of this annuity?

Mini Case: Joe Blue is not a big financial expert, but on April 3, 2002, the self-employed appliance repair man did the financial news!

Joe was the sole winner of an advertised $48 million BC Lottery game.

Joe had a choice of one of two payoff optins:

– either a lump-sum payment upfront or

– an annuity over 25 years.

Joe Blue accepted a lump-sum payment of $26,072,769 pretax, in full settlement of the $48 million advertised pot.

The annuity alternative was equal annual payments of $1,920,000 pretax, over 25 years.

Did Joe Blue make a sound financial decision as to how he should receive his winnings?

Should he have taken the stream of payments instread of the lump sum?

Please detail your logic in writing and show your calculations.