Mary and Penny were equal partners in the ownership of a gift shop but after several disagreements, have decided to terminate the partnership. Mary offers to purchase Penny’s interest by paying either $20,000 today or $35,000 five years from today. If Penny’s opportunity cost is 12% annually (APY = 12%), which options do you recommend Penny to choose? And why? (1 point)A broker recommends a stock that is now selling at $86 a share and paying no dividend. The broker thinks that the stock will go up by 9 to 12 percent per year (APY is 9 to 12 percent). If so, what will be its price range in five years? (1 point)Anne and Nick Sender estimate that they will need $17,000 to pay for their dream trip to Italy. They now have $8,000, which they can invest at an annual rate of 13%, compounded quarterly. How many years will the Senders have to wait before they can make their trip? (0.5 pointsHelen and Roger Beaman have $3,990 now and want to invest it in a savings instrument with interest compounded monthly so that it will equal $5,000 in 3 years. What annual interest rate will Beamans’ savings have to earn to achieve this goal? (0.5 points)Suppose someone offered to sell you a note that calls for $1,000 payment three years from today. The person offers to sell the note for $850. You have $850 in a bank’s savings instrument that pays a 6.77% APR with daily compounding; and you plan to leave this money in the bank unless you buy the note. The note is not risky – that is, you are sure it will be paid on schedule. Follow the steps below and explore – should you buy the note? (1 point) Choose one credit card you are using now. If you do not have a credit card, you can look at the credit card your friends or family members are using. Search online for the APR of the credit card you choose. If you get a range of APR, you can use any number within the range as the card’s APR. Write down the information of the card – its issuer, name and APR. Suppose there is a balance of $8,000 on the card and the grace period is already over. How long does it take for this balance to become $10,000, based on the information above you find? (0.5 points)Choose a checking/savings account you are using now. The account needs to earn interest. If not, you can look at an account your friends or family members hold. Search online for the APR or APY of the account you choose. Write down the information of the account – its issuer, name and APR or APY.Suppose there is a balance of $8,000 on the account. How long does it take for this balance to become $10,000, based on the information above you find? (0.5 points)Instructions: 1. Use the Excel financial functions and model each scenario in Excel. Make sure you are using the excel functions (PV, FV, NPER, RATE).2. Answer each question clearly below in the word file. You do not need to include all the details of your operations in the Excel. Only include the information (i.e. the calculation results) that helps you answer each question. 3. Elaborate in each question as much as possible in word doc. check the file below for the questions.FIN4453 Financial Modeling and Analytics

Xiaomin Guo, Ph.D., CFP®

Assignment 1 (5 points)

Instructions:

1. Use the Excel financial functions we discussed and model each scenario below in

Excel.

2. Answer each question clearly below in the word file. You do not need to include

all the details of your operations in the Excel. Only include the information (i.e.

the calculation results) that helps you answer each question.

3. Submit both excel file (with your detailed modeling) and word file (with your

answer/explanation to each question) through Canvas by deadline.

1. Mary and Penny were equal partners in the ownership of a gift shop but after several

disagreements, have decided to terminate the partnership. Mary offers to purchase

Penny’s interest by paying either $20,000 today or $35,000 five years from today. If

Penny’s opportunity cost is 12% annually (APY = 12%), which options do you

recommend Penny to choose? And why? (1 point)

2. A broker recommends a stock that is now selling at $86 a share and paying no

dividend. The broker thinks that the stock will go up by 9 to 12 percent per year (APY is

9 to 12 percent). If so, what will be its price range in five years? (1 point)

3. Anne and Nick Sender estimate that they will need $17,000 to pay for their dream trip

to Italy. They now have $8,000, which they can invest at an annual rate of 13%,

compounded quarterly. How many years will the Senders have to wait before they can

make their trip? (0.5 points)

4. Helen and Roger Beaman have $3,990 now and want to invest it in a savings

instrument with interest compounded monthly so that it will equal $5,000 in 3 years.

What annual interest rate will Beamans’ savings have to earn to achieve this goal? (0.5

points)

5. Suppose someone offered to sell you a note that calls for $1,000 payment three years

from today. The person offers to sell the note for $850. You have $850 in a bank’s savings

instrument that pays a 6.77% APR with daily compounding; and you plan to leave this

money in the bank unless you buy the note. The note is not risky – that is, you are sure it

will be paid on schedule. Follow the steps below and explore – should you buy the note?

(1 point)

1) by comparing your future value (FV) if you buy the note versus leaving your

money in the bank (FV of the note is $1,000, compare this to the FV of leaving

$850 in the bank for 3 years with daily interest compounding, should you buy the

note?)

2) by compounding the present value (PV) of the note with your current bank

1

FIN4453 Financial Modeling and Analytics

Xiaomin Guo, Ph.D., CFP®

investment (PV of the note is the $1,000 payout in 3 years assuming the same

daily compounded interest as your bank is paying, and the PV of your bank

investment is the $850, should you buy the note?)

3) Based on parts a and b, do you buy the note or keep your money in the bank? Be

sure to explain your answer for each part.

6. Choose one credit card you are using now. If you do not have a credit card, you can

look at the credit card your friends or family members are using. Search online for the

APR of the credit card you choose. If you get a range of APR, you can use any number

within the range as the card’s APR. Write down the information of the card – its issuer,

name and APR.

Suppose there is a balance of $8,000 on the card and the grace period is already over.

How long does it take for this balance to become $10,000, based on the information

above you find? (0.5 points)

Choose a checking/savings account you are using now. The account needs to earn

interest. If not, you can look at an account your friends or family members hold. Search

online for the APR or APY of the account you choose. Write down the information of the

account – its issuer, name and APR or APY.

Suppose there is a balance of $8,000 on the account. How long does it take for this

balance to become $10,000, based on the information above you find? (0.5 points)

2

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