Questions:
1. Time Value of Money, Practical Applications in Business and Personal Decisions
If you have put money in a savings account, made monthly auto or mortgage payments, or paid down your student loan ahead of time you have inherently applied TVM.
Discuss how you may have used TVM in a recent investment or loan decision and explain some of the TVM details that may have been involved in your transaction.
If you have not used TVM in the past financial transactions explain potential TVM applications you would encounter in future business or personal transactions.
2. Compounding Interest and the Banker
There are many factors influencing the cost of money for both individuals and corporations. Suppose you deposit money in an interest bearing account and at the same time borrow a bit of money from the same bank.
In which account would the bank apply quarterly compounding factors versus simple interest?
Explain your choices and your reasoning. You may want to check your personal accounts in regard to this type of transaction.
3. Is Positive Beta Better than Negative Beta?
A Beta factor represents risk in a financial instrument or commodity. Explain the reasons for changes in beta and explain if one should be more concerned with a negative versus positive factor. Be sure to reference volatility. Please provide an example of negative Beta.