Author Question: Consider the TVM equation: A decrease in the interest rate will decrease the future value, other ... (Read 50 times)

rayancarla1 · **on:** Jul 10, 2018

Consider the TVM equation: A decrease in the interest rate will decrease the future value, other things remaining equal.

Indicate whether the statement is true or false.

Question 2

The financial aid office at your university has offered to pay your full annual tuition cost of 22,000 this year, as long as you maintain a grade point average of 3.00.

If tuition costs rise at a rate of 6 per year while you are in college, but the financial aid office continues to pay exactly 22,000 per year for your tuition, how much out-of-pocket tuition costs will you have your senior year? NOTE: Think carefully about this problem when figuring the number of years from the start of your freshman year to the start of your senior year, assuming normal progress toward graduation in four years. Further, be aware that while tuition costs are rising your tuition is covered up to only 22,000. You must pay any excess tuition costs.
A) 0
B) 3,351
C) 4,202
D) 5,774

verrinzo · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

Answer: TRUE

Answer to Question 2

Answer: C
Explanation: C) FV = PV (1 + r)n - PV = 22,000 (1.06)3 - 22,000 = 26,202 - 22,000 = 4,202