Question 1

(5 points) $50 today is worth MORE than $50 tomorrow.

True

False

Question 2

(5 points) $100 invested for 10 years at 12% interest is worth more in FV

terms than $200 invested for 10 years at 4% interest.

True

False

Question 3

(5 points) Shawn wants to buy a new telescope. He estimates that it will take
him one year to save the money and that the telescope will cost $200. At an
interest rate of 6%, how much does Shawn need to set aside today to
purchase the telescope in one year? (Enter just the number without the $
sign or a comma)

Answer for Question 3

188.68

Question 4
(10 points) Je has $1,000 that he invests in a safe financial instrument
expected to return 3% annually. Marge has $500 and invests in a more risky
venture that is expected to return 7% annually. Who has more after 20
years? And how much does he/she have in FV terms?

Je; 1604

Je; 1806

Marge; 1935

Marge; 1806

Marge; 1604

Je; 1935

Question 5

(10 points) Your dad invested $25 for you 70 years ago in a fund and you
have not withdrawn any money since. If the fund has averaged a return of 8
percent over the last 70 years, what is the current value of that investment?
(Round to the nearest whole dollar; enter just the number without the $ sign
or a comma)

Answer for Question 5

5465

Question 6

(10 points) Cindy and Jennifer are twin sisters. They both have a $10,000
investment earning 7%. Cindy withdraws $2,000 of her money now and goes
on a shopping spree. Jennifer keeps all her money invested. After 15 years,
when each are looking for money to put a down payment on a house, how
much more does Jennifer have? (Enter just the number without the $ sign or
a comma; round to the nearest whole dollar.)

Answer for Question 6

5518

Question 7
(10 points) Joe is getting ready to buy a car. He has $20,000 in investments
earning 4.9% annually. The car also costs $20,000. If he doesnt pay cash for
the car, Joe can get a loan at 2.9% interest for 5 years. The loan is structured
so that Joe pays one balloon payment at the end of 5 years. The balloon
payment includes the principal plus all interest accrued over 5 years. If Joe
takes the loan will he have enough money available from his investments to
make the balloon payment? How much will he be short/have to spare?

Yes; 5404

No; 2082

No; 2331

No; 5404

Yes; 2331

Yes; 2082

Question 8

(15 points) Juan has $100,000 to invest and he has narrowed down his
decision to two investments. Option A returns 60% annually for 4 years, but
the maximum investment he can make is $10,000. Option B returns 12%
annually for 4 years and would require the entire $100,000. Which option
produces the best result for Juan and what is the benefit over the lesser
option? Assume that the $90,000 not invested in Option A would be placed
in a safe deposit box earning no interest.

Option A; 19373

Option A; 1816

Option A; 9532

Option B; 19373

Option B; 9532

Option B; 1816

Question 9

(15 points) Rondo is in the market for a new car. He has narrowed his search
down to 2 models. Model A costs $32,000 and Model B costs $28,000. With
both cars he plans to pay cash and own them for 4 years before trading in
for a new car. His research indicates that the trade in value for Model A after

4 years is 60% of the initial purchase price, while the trade in value for Model
B is 45%. The interest rate is 5%. For simplicity assume that operating and
maintenance costs for the models are identical. Which model is the better
decision and how much "cheaper" is it than the alternative?

Model B; 1207

Model A; 1257

Model A; 1430

Model B; 4000

Model B; 1430

Model A; 4000

Question 10

(15 points) Christine is a new homebuyer. She wants to make sure that she
incorporates the cost of maintenance into her decision. She estimates that
routine repairs and maintenance on the home she is considering will be
$1,590 in the first year (one year from now). Due to the increasing age of the
home, she expects that maintenance costs will increase 6% annually. The
interest rate is 5%. If she plans to be in the home for 10 years, what is the
present value of all future maintenance? (Note that maintenance costs will
change annually, and starts one year from now and she plans to do the last
one before selling her house.)

15000

15809

14413

19771

In accordance with the Coursera Honor Code, I (Carlos Leonel

Hernndez Maldonado) certify that the