Part 1
Cash flow time lines
1. List and describe the purpose of each part of a time line with an initial cash inflow and a future cash outflow. Which cash flows should be negative and which positive? Why?
Investments
2. Would you prefer to have an investment earning 5 percent for 40 years or an investment earning 10 percent for 20 years? Explain.
Part 2
Annuities
1. How can you use the present value of an annuity concept to determine the price of a house you can afford?
Tax deductible
2. The interest on your home mortgage is tax deductible. Why are the early years of the mortgage more helpful in reducing taxes than in the later years?
Part 3
Financial Institutions
1. What are the different types of financial institutions? Include a description of the main services offered by each.
Shape of a yield curve
2. Discuss and compare the three explanations for the shape of the yield curve.