7/20/2018 Assessment 4 – BUS-FP3062 - Summer 2018 - Section 01 Assessment 4 Tutorials Support Time Value of Money: Annuity Cash Flow Details Attempt 1 Available Attempt 2 Log Out Felicia Smith 1 Attempt 3 Overview Respond to four questions and solve three computational problems about time value of money (TMV) as it applies to annuity cash flows. You know how the TVM concept as applies to single cash flow. However, in real life you will come across financial applications that require multiple or annuity cash flows. That is why it is important to know how to apply the TVM concept to annuity cash flows; for example, how to amortize a mortgage or car loan. By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria: Competency 1: Evaluate the global financial environment. Explain why a saver would prefer more or less frequent interest compounding periods. Explain the purpose of an amortization schedule. Competency 2: Define finance terminology and its application within the business environment. Describe uses of an amortization schedule. Explain why interest paid in the early years of a home mortgage is more helpful in reducing taxes than interest paid in later years. Explain the differences between an ordinary annuity and an annuity due. Competency Map Use this online tool to track your performance and progress through your course. CHECK YOUR PROGRESS SHOW LESS  Resources Suggested Resources The following optional resources are provided to support you in completing the assessment or to provide a helpful context. For additional resources, refer to the Research Resources and Supplemental Resources in the left navigation menu of your courseroom. Library Resources The following e-books or articles from the Capella University Library are linked directly in this course: Weaver, S. C., & Weston, J. F. (2001). Finance and accounting for nonfinancial managers. New York, NY: McGraw-Hill. https://courserooma.capella.edu/webapps/blackboard/content/listContent.jsp?course_id=_121654_1&content_id=_6433811_1&mode=reset 1/3 7/20/2018 Assessment 4 – BUS-FP3062 - Summer 2018 - Section 01 Sherman, E. H. (2011). Finance and accounting for nonfinancial managers (3rd ed.). New York, NY: Tutorials Support Log Out Felicia Smith American Management Association. 1 Course Library Guide A Capella University library guide has been created specifically for your use in this course. You are encouraged to refer to the resources in the BUS-FP3062 – Fundamentals of Finance Library Guide to help direct your research. Bookstore Resources The resources listed below are relevant to the topics and assessments in this course and are not required. Unless noted otherwise, these materials are available for purchase from the Capella University Bookstore. When searching the bookstore, be sure to look for the Course ID with the specific –FP (FlexPath) course designation. Cornett, M., Adair, T., & Nofsinger, J. (2016). M: Finance (3rd ed.). New York, NY: McGraw-Hill. SHOW LESS  Assessment Instructions Respond to the questions and complete the problems. Questions In a Word document, respond to the following. Number your responses 1–4. 1. Explain whether you would you rather have a savings account that paid interest compounded on a monthly basis or compounded on an annual basis? Why? 2. Describe what an amortization schedule is and its uses. Explain the purpose of an amortization schedule. 3. Interest on a home mortgage is tax deductible. Explain why interest paid in the early years of a home mortgage is more helpful in reducing taxes than interest paid in later years. 4. Explain the difference between an ordinary annuity and an annuity due. Use references to support your responses as needed. Be sure to cite all references using correct APA style. Your responses should be free of grammar and spelling errors, demonstrating strong written communication skills. Problems In either a Word document or Excel spreadsheet, complete the following problems. You may solve the problems algebraically, or you may use a financial calculator or an Excel spreadsheet. If you choose to solve the problems algebraically, be sure to show your computations. If you use a financial calculator, show your input values. If you use an Excel spreadsheet, show your input values and formulas. In addition to your solution to each computational problem, you must show the supporting work leading to your solution to receive credit for your answer. 1. If interest rates are 8 percent, what is the future value of a $400 annuity payment over six years? Unless otherwise directed, assume annual compounding periods. Recalculate the future value at 6 percent interest and 9 percent interest. 2. If interest rates are 5 percent, what is the present value of a $900 annuity payment over three years? Unless otherwise directed, assume annual compounding periods. https://courserooma.capella.edu/webapps/blackboard/content/listContent.jsp?course_id=_121654_1&content_id=_6433811_1&mode=reset 2/3 7/20/2018 Assessment 4 – BUS-FP3062 - Summer 2018 - Section 01 Recalculate the present value at 10 percent interest and 13 percent interest. Felicia Smith 3. What is the present value of a series of $1150 payments made every year for 14 years when the discount rate is 9 percent? Recalculate the present value using discount rate of 11 percent and 12 percent. Tutorials Support Time Value of Money: Annuity Cash Flow Scoring Guide Use the scoring guide to enhance your learning. Log Out 1 VIEW SCORING GUIDE How to use the scoring guide SUBMIT ASSESSMENT This button will take you to the next available assessment attempt tab, where you will be able to submit your assessment. https://courserooma.capella.edu/webapps/blackboard/content/listContent.jsp?course_id=_121654_1&content_id=_6433811_1&mode=reset 3/3 7/20/2018 Time Value of Money: Annuity Cash Flow Scoring Guide Time Value of Money: Annuity Cash Flow Scoring Guide CRITERIA NON-PERFORMANCE BASIC PROFICIENT DISTINGUISHED Explain why a saver would prefer more or less frequent interest compounding periods. Does not identify why a saver would prefer more or less frequent interest compounding periods. Explains why a saver would prefer more or less frequent interest compounding periods but omits key elements in the explanation. Explains why a saver would prefer more or less frequent interest compounding periods. Analyzes why a saver would prefer more or less frequent interest compounding periods and connects the analysis to relevant realworld examples. Describe the uses of Does not describe an amortization the uses of an schedule. amortization schedule. Describes the uses of an amortization schedule but omits key elements. Describes the uses of an amortization schedule. Analyzes the uses of an amortization schedule and connects the analysis to relevant real-world examples. Explain the purpose of an amortization schedule. Does not explain the purpose of an amortization schedule. Explains of the purpose of an amortization schedule but omits key elements. Explains the purpose of an amortization schedule. Analyzes the purpose of an amortization schedule and connects the analysis to relevant real-world situations. Explain why interest paid in the early years of a home mortgage is more helpful in reducing taxes than interest paid in later years. Does not explain why interest paid in the early years of a home mortgage is more helpful in reducing taxes than interest paid in later years. Explains why interest paid in the early years of a home mortgage is more helpful in reducing taxes than interest paid in later years but omits key elements. Explains why interest paid in the early years of a home mortgage is more helpful in reducing taxes than interest paid in later years. Analyzes why interest paid in the early years of a home mortgage is more helpful in reducing taxes than interest paid in later years and connects the analysis to relevant real-world situations. Explain the differences between an ordinary annuity and an annuity due. Does not explain the differences between an ordinary annuity and an annuity due. Explains an annuity but does not explain the key differences between an ordinary annuity and an annuity due. Explains the differences between an ordinary annuity and an annuity due. Analyzes the differences between an ordinary annuity and an annuity due and connects the analysis to relevant real-world situations. Compute the future value of an interest rate. Does not compute the future value of an interest rate. Computes the future value of an interest rate using inaccurate or incomplete data. Computes the future value of an interest rate. Computes the future value of an interest rate and explains the computation. Compute the present value of an interest rate. Does not compute Computes the present the present value of value of an interest an interest rate. rate using inaccurate or incomplete data. Computes the present value of an interest rate. Computes the present value of an interest rate and explains the computation. https://courserooma.capella.edu/bbcswebdav/institution/BUS-FP/BUS-FP3062/180100/Scoring_Guides/u04a1_scoring_guide.html 1/1 
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