Time Value of Money

Answer all of the following questions. For each answer, show your work to get full points (stating the answer alone is not sufficient).

1. Select a userid/password and join group MGF301UB (password = mgf301ub) at Stocksquest.com. Details are attached to this assignment. Invest at least $90,000 total of your $100,000 portfolio in any number of stocks from 1 to 10. Turn in your userid and a printout (or summary) of your stock selections with this assignment.

See Attatchments

2. Your uncle died last year and left you money in his will. You are to receive $50,000 in four years (i.e., in time 4).

(a) What is the value of the inheritance today (in time 0) if the appropriate discount rate is 6% and you compound annually?

PV = (future payment)/(1+r)t

PV = (50,000)/(1+.06)4

PV = $39,604.68

(b) If you invest the money when you receive it in time 4, how much will it grow to 20 years from today (i.e., in time 20) if you earn 6% each year?

FV = PV * (1+r)t

FV = (50,000/(1+r)t) * (1+r)t

FV = (50,000/(1+.06)4) * (1+.06)20

FV = $127,017.58

3. Your neighbor is buying a new recreational vehicle (RV). If he buys the RV for cash, the price is $32,000. Alternatively, he could buy the RV for monthly