Part 1: Essay
Describe the financial crisis of 2007- 2009. What were the primary causes of this financial crisis?
Part 2:
- Ira Schwab opens up a Schwab IRA and places $2,000 in his retirement account at the beginning of each year for 10 years. He believes the account will earn 5 percent interest per year, compounded quarterly. How much will he have in his retirement account in 10 years?
- The city of Glendale borrows $48 million by issuing municipal bonds to help build the Arizona Cardinals football stadium. It plans to set up a sinking fund that will repay the loan at the end of 10 years. Assume a 4 percent interest rate per year. What should the city place into the fund at the end of each year to have $48 million in the account to pay back their bondholders?
- Part 3: Matthew is considering several possible compensation alternatives for services he has provided as a consultant: Option A: Matthew could receive $8,000 today. Option B: Matthew could receive $2,500 at the end of each of the next four years. Option C: Matthew could receive $12,000 five years from now. Required:
- Calculate the present value for each option assuming that Matthew can earn 7 percent on any investment funds.
- Which option results in the greatest financial benefit to Matthew?
- If Matthew earns 10 percent, will that change your answer to # 2 above? Please explain
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