TRANSCRIPT FOR THPS-3 CHAT SESSION
Richard.Fendler: THERE ARE QUESTIONS ON THPS-3 THAT ARE MUCH HARDER THAN
ANYTHING THAT WILL BE ON THE EXAM
Richard.Fendler: YOU WILL NOT NEED EXCEL TO DO ANY OF THE PROBLEMS ON THE
EXAM. YOUR CALCULATOR WILL BE ENOUGH
Richard.Fendler: YOU WILL NOT NEED EXCEL TO DO ANY OF THE PROBLEMS ON THE
EXAM. YOUR CALCULATOR WILL BE ENOUGH
Quratul.Maya: and under announcement there is no attach formula sheet as you mentioned
Richard.Fendler: I BELIEVE THAT IF YOU CAN DO THE PROBLEMS ON THPS-3, YOU CAN DO
PRETTY MUCH ANYTHING IN TIME VALUE OF MONEY
Richard.Fendler: I WILL FIX THE LACK OF A FORMULA SHEET
Quratul.Maya: ok
Richard.Fendler: SOMETIMES FILES DO NOT CONNECT PROPERLY
Richard.Fendler: I WILL FIX THAT RIGHT AFTER WE ARE DONE HERE
Richard.Fendler: LETS GET STARTED ON THPS-3
Quratul.Maya: ok
Brijeshkumar.Mistry: 👍
Anh.Tran: Sounds good professor
Richard.Fendler: ARE THERE ANY QUESTIONS ABOUT THE MULTIPLE CHOICE
QUESTIONS?????
James.Wallace III: Question 9
Quratul.Maya: yes #3
Anh.Tran: Yes. #1
Danyal.Qamar: Question 8
Richard.Fendler: #3
Quratul.Maya: #15
Anish.Patel: yes question 16
Quratul.Maya: #16
Richard.Fendler: OH, A LOT!!!
Kera.Astin: 18
Richard.Fendler: OK, HOLD ON UNTIL I DO THESE.
Derek.Marcus: yes LOL
Richard.Fendler: 1, 3, 8, 9, 15, 16 AND 18
Richard.Fendler: #1
James.Wallace III: and 14
Richard.Fendler: IF QUARTERLY COMPOUNDING, WE MULTIPLE THE NUMBER OF YEARS
BY 4 AND DIVIDE THE INTEREST RATE BY 4. RIGHT?
Richard.Fendler: SO, WHAT IS THE CORRECT ANSWER TO #1?????
Anish.Patel: a?
Anh.Tran: I put false
Richard.Fendler: WHY A?????
Brijeshkumar.Mistry: a
James.Wallace III: a
Derek.Marcus: A
Richard.Fendler: DOES A SAY RATE DIVIDED BY 4 AND YEARS MULTIPLED BY 4?????
Brijeshkumar.Mistry: no
Anish.Patel: no
Richard.Fendler: IF SO, I BELIEVE IT WOULD READ: "WE ARE REALLY INVESTING MONEY
FOR 40 3-MONTH PERIODS, DURING WHICH WE RECEIVE2% INTEREST EACH PERIOD."
Richard.Fendler: RIGHT?????
Richard.Fendler: SO, AGAIN, WHAT IS THE CORRECT ANSWER TO #1???????
Kera.Astin: b
Brijeshkumar.Mistry: yes
Anish.Patel: b
Richard.Fendler: I BELIEVE THAT KERA IS CORRECT.
Richard.Fendler: #3
Richard.Fendler: IF THE NUMBER OF COMPOUNDING PERIODS INCREASES, THE EFFECTIVE
ANNUAL RATE (EAR) INCREASES. RIGHT?????
Richard.Fendler: 8% COMPOUNDED MONTHLY IS A LARGER EAR THAN 8% COMPOUNDED
SEMI-ANNUALLY. RIGHT????
Kera.Astin: yes
Maya.Green: yes
Anish.Patel: yes
Richard.Fendler: AS THE INTEREST RATE INCREASES, THE FUTURE VALUE OF AN AMOUNT
DEPOSITED TODAY WILL DO WHAT?????
Kera.Astin: increase
Richard.Fendler: KERA IS RIGHT ON!!!!!!!!!!!!!!!!!!!
Anish.Patel: increase
increase
Brijeshkumar.Mistry: decrease
Kassidi.Reid joined the chat.
Quratul.Maya: so the answer is false?
Brijeshkumar.Mistry: increase***
Richard.Fendler: IF INTEREST RATE INCREASES (ALL ELSE CONSTANT), FV INCREASES.
RIGHT?????
Quratul.Maya: yes
Maya.Green: so discount rate and future cash flows are inversely related? should we think of it that way?
Anh.Tran: yes false because it states FV will decrease
Richard.Fendler: THE QUESTION READS (BASICALLY), IF INTEREST RATE INCREASES, FV
DECREASES. SO, IS THAT TRUE OR FALSE?????
Quratul.Maya: false
Anh.Tran: false
Kera.Astin: false
Richard.Fendler: I CANNOT SAY FOR SURE (THAT WOULD BE GIVING OUT ANSWERS IN THE
CHAT), BUT SO FAR I WILL TELL YOU THAT KERA IS 3 FOR 3!!!
Richard.Fendler: #8
Richard.Fendler: FOR A MORTGAGE LOAN, YOU PAY THE SAME AMOUNT EVERY MONTH.
HOWEVER, BECAUSE YOU ARE PAYING OFF THE BALANCE EVERY MONTH, THE
AMOUNT OF PAYMENT THAT GOES TO PAYING INTEREST VS. PRINCIPLE CHANGES.
Richard.Fendler: AS THE LOAN BALANCE SHRINKS, THE CHARGE TO INTEREST GOES
DOWN EACH MONTH.
Richard.Fendler: THUS, THE AMOUNT THAT GOES TO REDUCING PRINCIPLE GOES UP EACH
MONTH
Derek.Marcus: A
James.Wallace III: A
Richard.Fendler: THAT SHOULD TELL YOU THE ANSWER TO #8. IF NOT, CREASE AN
AMORTIZATION TABLE AND YOU WILL SEE IF WITH NUMBERS.
Richard.Fendler: #9
Richard.Fendler: SINCE INTEREST RATES AND PV ARE INVERSELY RELATED, THE OPTION
WITH THE SMALLEST EFFECTIVE ANNUAL RATE WILL RESULT IN THE LARGEST PV.
Richard.Fendler: WHICH OF THESE HAS THE SMALLEST EAR?????
Quratul.Maya: a?
Richard.Fendler: (CONSIDER WHAT I SAID ABOUT #3).
Brijeshkumar.Mistry: a
Derek.Marcus: A
James.Wallace III: semiannually but continuously can be defined...correct
Richard.Fendler: BRIJESHKUMAR - SO THE MORE OFTEN YOU COMPOUND, THE SMALLER
THE EAR?????
Anish.Patel joined the chat.
Kera.Astin: d?
Brijeshkumar.Mistry: i am not sure professor
James.Wallace III: D
Maya.Green: D??
Richard.Fendler: IF YOU DEPOSITED SOME MONEY TODAY, WOULD YOU RATHER EARN
10% COMPOUNDED CONTINUOUSLY OR 10% COMPOUNDED SEMI-ANNUALLY??????
Kera.Astin: continuously
Maya.Green: semi-annually
Richard.Fendler: I WANT TO GET YOUR GUYS TO THINK! MANY OF THESE ARE LOGICAL.
DON'T JUST TRY TO MEMORIZE TO GET ANSWERS CORRECT.
Richard.Fendler: OK, LET'S DO IT THIS WAY.
Anh.Tran: continuously, but from the text I believed that daily should give the largest. the more
compounded the better
Anish.Patel: 9 is A
James.Wallace III: continuously if it is daily, but semiannually if continously is annually
Richard.Fendler: THE EQUATION FOR EAR IS:
EAR = [(1 + r/q)^q] - 1
Richard.Fendler: WHERE r IS THE INTEREST RATE AND q IS THE NUMBER OF TIMES PER
YEAR INTEREST IS COMPOUNDED.
James.Wallace III: got it...just wasnt sure the frequency of continuosly
Maya.Green: could you explain what exactly it means for it to be compounded continuously?
Richard.Fendler: LETS FIND EAR FOR SEMI-ANNUAL, MONTHLY AND CONTINUOUS. (BUT I
NEED SOME HELP FROM YOU GUYS BECAUSE THE BATTERY ON MY CALC JUST DIED)
Richard.Fendler: :(
Brijeshkumar.Mistry: okay
Richard.Fendler: REALLY, I AM SAD.
Richard.Fendler: IT IS SORT OF LIKE MY DOG DIED
Richard.Fendler: WELL, MAYBE NOT THAT BAD, BUT .......
Anish.Patel: Omg, should I buy you a new battery?
Richard.Fendler: OK, 10%, SEMIANNUAL
Richard.Fendler: EAR = [(1 + .10/2)^2] - 1
Richard.Fendler: OR, EAR = (1.05)^2 - 1
James.Wallace III: 358.31
Richard.Fendler: WHAT IS THE VALUE FOR THIS (AS A PERCENT) ROUNDED TO 4 DECIMAL
PLACES?????
James.Wallace III: 358.3125
Richard.Fendler: WHAT????????????????????????????????
Richard.Fendler: WHAT IS 1.05^2
Anish.Patel: 0.1025
Kera.Astin: 1.1025
Anish.Patel: 1.1025
Quratul.Maya: 1.1025
Richard.Fendler: JAMES - I THINK YOUR CALCULATOR IS SICK!!!
Derek.Marcus: 0.1025
Maya.Green: .1025
Richard.Fendler: MAYBE IT HAS COVID?
James.Wallace III: sorry...moved ahead
Samia.Thobani: 0.1025
Brijeshkumar.Mistry: 0.1025
Richard.Fendler: HAHA
Derek.Marcus: i didnt add the 1 in front
Richard.Fendler: YES, THE ANSWER AS A DECIMAL IS .1025. AS A PERCENT, THAT IS 10.25%
Richard.Fendler: RIGHT????
Kera.Astin: yes
Maya.Green: yes
Richard.Fendler: NOW, LET'S FIND EAR WITH MONTHLY COMPOUNDING
Samia.Thobani: Correct
Richard.Fendler: EAR = [(1 + .10/12)^12] - 1
Derek.Marcus: yes but do i need to add the 1 in front
Richard.Fendler: WHAT IS THAT (AS A PERCENT)?????
Richard.Fendler: EAR = (1.008333)^12 - 1
Derek.Marcus: 1.025
Derek.Marcus: 1.1025
Derek.Marcus: 11%
Brijeshkumar.Mistry: 0.1047
Anish.Patel: 0.1047086851
Kera.Astin: I got .1047
Samia.Thobani: 0.1047
Quratul.Maya: 10.47%
Faheed.Choudhry: 10.47
Richard.Fendler: DEREK - THAT IS CORRECT FOR SEMIANNUAL. WHAT ABOUT
MONTHLY?????
Kera.Astin: so 10.47%
Samia.Thobani: 10.47%
Richard.Fendler: OK, THE LAST ONES ARE BETTER.
Maya.Green: 10.47%
Richard.Fendler: ROUNDED TO 4 DECIMAL PLACES, THE ANSWER IS 10.4713%
Richard.Fendler: SO, WHAT HAPPENS TO THE EAR AS THE NUMBER OF COMPOUNDING
PERIOD INCREASES?????
Derek.Marcus: got it
Brijeshkumar.Mistry: yes
Richard.Fendler: AS THE NUMBER OF PERIODS INCREASE, ALL ELSE CONSTANT, THE EAR
INCREASES.
Richard.Fendler: SO, BACK TO MY ORIGINAL QUESTION, I WOULD RATHER EARN 10%,
COMPOUNDED MONTHLY THAN 10%, COMPOUNDED SEMI-ANNULLY. WHAT ABOUT
YOU?????
Richard.Fendler: OK, WHAT DO WE DO FOR CONTINUOUS COMPOUNDING? DID ANYONE
HERE WATCH THE CHAPTER 7 VIDEO LECTURE?????
Derek.Marcus: can we do a webex?
Richard.Fendler: THE PRECISE ANSWER INVOLVES USING THE EXPONENTIAL FUNCTION
(I.E., e)
James.Wallace III: yes
Brijeshkumar.Mistry: 10% compounded monthly
Maya.Green: yes I watched it
Brijeshkumar.Mistry: yes i watched too
Richard.Fendler: BUT WHO IN THE WORLD KNOWS WHAT THAT IS OR HOW THAT THING
WORKS??????
Derek.Marcus: i would watch as well
Derek.Marcus: webex works
Richard.Fendler: IN FACT, WHO MADE UP THE STUFF ABOUT LOGS???? LIKE THE ln
FUNCTION??? OF WHAT VALUE IS THAT??? REALLY???
Richard.Fendler: :)
Richard.Fendler: :)
Derek.Marcus: LOL
Richard.Fendler: IN THE CHAPTER 7 VIDEO LECTURE, I TELL YOU THAT THE BEST WAY TO
FIND THE EFFECTIVE RATE IF CONTINUOUS IS TO ASSUME THAT q = 1,000,000. RIGHT?????
Quratul.Maya: can we move on to #15? i have alot of questions in calculation questions
Kera.Astin: right
Richard.Fendler: SO, FOR CONTINUOUS COMPOUNDING,
EAR = [(1 + .10/1000000)^1000000] - 1
Derek.Marcus: yes
Richard.Fendler: WHAT DOES THIS EQUAL (AS A PERCENT ROUNDED TO 4 DECIMAL
PLACES)?????
Quratul.Maya: 1.0050%
Richard.Fendler: I GET 10.5171% (USING EXCEL ON THE SIDE ...)
Anish.Patel: 10.517%
Brijeshkumar.Mistry: correct
Anh.Tran: I got 10.51
Faheed.Choudhry: 10.5171%
Richard.Fendler: YES!!!!!!!!!!!!! WAY TO GO ANISH!!!!!!!!!!!!!! AND ANH!!!
Brijeshkumar.Mistry: 10.51709
Richard.Fendler: VERY GOOD.
Richard.Fendler: SO, BACK TO THPS-3
Quratul.Maya: i cant do this on my calcultor dont know why
Anh.Tran: how can I raise to a negative power in excel professor?
Richard.Fendler: WHAT IS THE CORRECT ANSWER TO #9???????
Quratul.Maya: never mind i got it
Brijeshkumar.Mistry: a
Richard.Fendler: GOOD
Anh.Tran: a
James.Wallace III: a
Richard.Fendler: VERY GOOD.
James.Wallace III: #14
Richard.Fendler: BUT NOT WHEN IT COMES TO THE CORRECT ANSWER FOR #9
James.Wallace III: lol
Quratul.Maya: omg
Richard.Fendler: THE QUESTION SAYS: WHICH RATE WILL RESULT IN THE LARGEST
PRESENT VALUE. RIGHT?????
Quratul.Maya: its confusing
Anh.Tran: hahah ive never been more confused
Maya.Green: B?
Derek.Marcus: im confused. i didnt get that
Richard.Fendler: FOR PRESENT VALUE, THE LARGER THE RATE, THE SMALLER THE PV.
RIGHT?????
Anh.Tran: I put daily orginally. 365 as n
Richard.Fendler: OK, NO MATTER WHAT YOU ORIGINALLY PUT. WHAT IS THE CORRECT
ANSWER???????????????????
Maya.Green: wait so its e? bc they all have the same rate
Richard.Fendler: FOR FV, THE LARGER THE RATE, THE LARGER THE FV. (AND VICE VERSA).
FOR PV, THE LARGER THE RATE, THE SMALLER THE PV (AND VICE VERSA).
Derek.Marcus: what number are we on?
James.Wallace III: lol...C
Richard.Fendler: #9
Anish.Patel: 9
Brijeshkumar.Mistry: basically, smaller the interest rate larger the pv?
Derek.Marcus: thank you
Richard.Fendler: AGAIN,
Richard.Fendler: FOR FV, THE LARGER THE RATE, THE LARGER THE FV. (AND VICE VERSA).
FOR PV, THE LARGER THE RATE, THE SMALLER THE PV (AND VICE VERSA).
Richard.Fendler: THIS QUESTION ASKS WHICH RATE WILL CREATE THE LARGEST PV
James.Wallace III: We're all over the place on this one. lol
Richard.Fendler: THAT WILL BE THE RATE THAT CREATES THE SMALLEST EAR.
RIGHT?????????????????
Quratul.Maya: daily? is it b?
Kera.Astin: D
Brijeshkumar.Mistry: d
Maya.Green: E bc the rate doesnt change
Richard.Fendler: KERA IS FOUR FOR FOUR!!!!!!!!!!!!!!!!!!!!!!!!!
Derek.Marcus: i had A but its D. okay got it
James.Wallace III: Back to my original answer...lol
Richard.Fendler: MAYA, WE JUST COMPUTED EAR FOR CONTINUOUS, MONTHLY, AND
SEMI-ANNUALLY.
Richard.Fendler: THESE WERE ALL DIFFERENT. RIGHT????????????
Brijeshkumar.Mistry: yes
Maya.Green: oh I was thinking the 10%
Richard.Fendler: DEREK SEES THE LIGHT!!!!!!!!!!!!!!!!!
Quratul.Maya: yes
Richard.Fendler: AND IN FINANCE, WHEN YOU SEE THE LIGHT, YOU GO TOWARDS
IT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Richard.Fendler: ALWAYS!!!
Anh.Tran: okay because semiannually rate was two and continuously was 100000. go with the smaller
rate guys
James.Wallace III: Sorry class...I got turned around on that one.
Quratul.Maya: how many questions we have in exam
Derek.Marcus: yesss
Richard.Fendler: (BY THE WAY, SOMEONE ABOVE ASKED IF WE COULD DO THIS SESSION
VIA WEBEX. THE PROBLEM WITH WEBEX IS THAT I CANNOT TYPE IN ANSWERS USING
NUMBERS LIKE I CAN DO HERE. I HAVE TRIED WEBEX FOR CHAT SESSIONS FOR THPS
ASSIGNMENTS IN THE PAST, AND I CAN ASSURE YOU THAT THIS IS MUCH BETTER).
Richard.Fendler: (BY THE WAY, SOMEONE ABOVE ASKED IF WE COULD DO THIS SESSION
VIA WEBEX. THE PROBLEM WITH WEBEX IS THAT I CANNOT TYPE IN ANSWERS USING
NUMBERS LIKE I CAN DO HERE. I HAVE TRIED WEBEX FOR CHAT SESSIONS FOR THPS
ASSIGNMENTS IN THE PAST, AND I CAN ASSURE YOU THAT THIS IS MUCH BETTER).
Richard.Fendler: EXCEPT FOR THE DOUBLE LINES (LIKE JUST HAPPENED)
Richard.Fendler: THESE SEEMS TO BE RANDOM.
Richard.Fendler: OR, MAYBE I HIT "RETURN" TOO HARD.
Brijeshkumar.Mistry: #14
Richard.Fendler: #15
Richard.Fendler: COMPUTE THE PV OF EACH OPTION
Richard.Fendler: PV OF PLAN A = 30,000
Richard.Fendler: RIGHT???
Quratul.Maya: yes
Richard.Fendler: PV OF PLAN B (WITH I = 8.25%) = 26,681.74
Brijeshkumar.Mistry: yes
Richard.Fendler: PV OF PLAN B (WITH I = 8.25%) = 28,014.31
Richard.Fendler: WHICH SHOULD TANYA CHOOSE?????
Quratul.Maya: plan b
Richard.Fendler: IF TANYA IS LOGICAL, SHE SHOULD WANT THE CHEAPEST ONE.
Derek.Marcus: I just want to see you work it out so i can see where i miss a step but this will work
Richard.Fendler: WHICH ONE IS THAT?????
Quratul.Maya: PLAN B
Kera.Astin: B
Richard.Fendler: YES!!!!!
James.Wallace III: Plan A
Richard.Fendler: #16
Anish.Patel: b
Maya.Green: could you work out how you got those numbers?
Quratul.Maya: 26681.74
Tylar.Matthews joined the chat.
Anh.Tran: I think theres a typo. Plan c is 28014.
Maya.Green: The way I did it I didn't get those numbers
Richard.Fendler: FOR B: PMT = 585; N = 60; I = 8.25/12=; CPT PV
Richard.Fendler: WHAT DO YOU GET FOR THIS?????
Anh.Tran: this one i got confused about raising a negative power
Richard.Fendler: THERE IS NO NEGATIVE POWER. I DO NOT KNOW WHAT YOU MEAN????
Richard.Fendler: USING THE BA II PLUS CALCULATOR:
PMT = 585; N = 60; I = 8.25/12=; CPT PV
Richard.Fendler: RIGHT????????????????
Maya.Green: 28681.7406
Quratul.Maya: 585*(1-.006875)/.006875
IS THIS RIGHT?
Richard.Fendler: IT IS 28,681.74
Richard.Fendler: (WHAT I SHOWED ABOVE). RIGHT?????
Richard.Fendler: (WHAT I SHOWED ABOVE). RIGHT?????
Maya.Green: thats wht i got too
Anh.Tran: ok I used wrong formula
Richard.Fendler: FOR PLAN C, DID I TYPE AN INCORRECT NUMBER?????
Anh.Tran: no but you put plan b twice
Quratul.Maya: is it 28014.31?
Anh.Tran: with two different numbers
Richard.Fendler: FOR C, THE PROCESS IS:
PMT = 500; N = 60; I = 8.25/12=; CPT PV
THEN YOU ADD 3500 TO THAT AMOUNT
Quratul.Maya: can you check if plan b numbers are correct
its 26681.74
Richard.Fendler: 28014.31
Richard.Fendler: RIGHT?????
Brijeshkumar.Mistry: 28014.3082
Brijeshkumar.Mistry: yes sir
Quratul.Maya: plan b number plz
Richard.Fendler: PMT = 500; N = 60; I = 8.25/12=; CPT PV + 24514.31
Quratul.Maya: is it 26681
Richard.Fendler: SORRY
Richard.Fendler: PMT = 500; N = 60; I = 8.25/12=; CPT PV = 24514.31
Richard.Fendler: THEN ADD 3500 TO THIS TO GET
Richard.Fendler: 28,014.31
Richard.Fendler: OK??????????????
Maya.Green: then you add the 3500 to that number right?
James.Wallace III: Both plan B and C, over 60 months she pays more than Plan A.
Richard.Fendler: FOR PLAN B IT WAS: PMT = 585; N = 60; I = 8.25/12=; CPT PV = 28,681.74
Brijeshkumar.Mistry: correct
Richard.Fendler: THE PRESENT VALUE IS TODAY'S VALUE OF WHAT YOU PAY IN THE
FUTURE
Quratul.Maya: thanks
Quratul.Maya: #16
Richard.Fendler: SO, FOR THIS QUESTION, WHAT SHE EFFECTIVELY IN PAYING TODAY FOR
THESE THREE OPTIONS IS:
Anh.Tran: plan c
Richard.Fendler: OPTION A: 30,000
OPTION B: 26.681.74
OPTION C: 28,014.31
Richard.Fendler: RIGHT??????????????????????
Kera.Astin: B
Quratul.Maya: plan b is the correct answer
Richard.Fendler: IF I COULD TYPE CORRECTLY:
OPTION A: 30,000
OPTION B: 26,681.74
OPTION C: 28,014.31
Kera.Astin: B
Richard.Fendler: SO, WHICH ONE IS THE CHEAPEST (I.E., THE BEST)?????
Kera.Astin: B
Maya.Green: b
Anh.Tran: b
Richard.Fendler: IF I WERE YOU GUYS, I WOULD SEE IF I COULD FORM A GROUP WITH
KERA IN IT!!!
Samia.Thobani: B it is
Richard.Fendler: #18
Quratul.Maya: we have been saying the same since start
Richard.Fendler: FOR THIS ONE, IT IS BEST TO MAKE UP AN EXAMPLE THAT FITS THE
PROBLEM.
Quratul.Maya: you missed #16
Kera.Astin: I thought we were on 16?
Richard.Fendler: PERPETUITY OF $1000 PER YEAR (FOREVER)
Anh.Tran: no that was 15
Richard.Fendler: PAYMENT OF $1000 IN YEAR 0, $1000 IN YEAR 1, ..., $1000 IN YEAR 5 (THIS IS
AN ANNUITY DUE FOR 6 PAYMENTS).
Richard.Fendler: PAYMENT OF $1000 IN YEAR 1, $1000 IN YEAR 2, ..., $1000 IN YEAR 6 (THIS IS
AN ORDINARY ANNUITY FOR 6 PAYMENTS).
Richard.Fendler: IF THE INTEREST RATE IS 10%, YOU CAN EASILY COMPUTE THE PV AND
FV OF ALL THREE. RIGHT?????
Richard.Fendler: THAT WILL SHOW YOU THE CORRECT ANSWER.
Richard.Fendler: OR, YOU CAN JUST GO OPTION BY OPTION AND SEE WHICH IS CORRECT.
Anish.Patel left the chat.
Richard.Fendler: FOR OPTION a, IS THE PV OF THE ORDINARY ANNUITY (I.E., AYMENT OF
$1000 IN YEAR 1, $1000 IN YEAR 2, ..., $1000 IN YEAR 6) LESS THAN OR GREATER THAN THE
PV OF THE ANNUITY DUE (I.E., PAYMENT OF $1000 IN YEAR 0, $1000 IN YEAR 1, ..., $1000 IN
YEAR 5)
Richard.Fendler: ANYONE????
Richard.Fendler: KERA?????
Erionna.Seldon: greater??
Anh.Tran: So we use two formulas correct? one for anuity due and one for ordinary
Richard.Fendler: ALL ELSE CONSTANT, WOULD YOU RATHER GET $1000 TODAY AND THEN
$1000 AT THE END OF YEARS 1, 2, 3, 4 AND 5
OR
$1000 AT THE END OF YEARS 1, 2, 3, 4,5 AND 6
Richard.Fendler: THAT IS, WOULD YOU RATHER GET MONEY SOONER OR LATER?????
Kera.Astin: Later, so it will be greater.
Richard.Fendler: I WOULD RATHER GET MONEY SOONER!!!! THAT IS ALWAYS THE BEST.
THAT IS WHAT TIME VALUE OF MONEY IS ALL ABOUT. THE SOONER YOU GET MONEY,
THE MORE VALUABLE IT IS.
Richard.Fendler: THAT IS, THE GREATER THE PRESENT VALUE.
Richard.Fendler: SO, IS a CORRECT OR NOT???????????????
Anh.Tran: incorrect
Maya.Green: no
Kera.Astin: no
Richard.Fendler: STATED ANOTHER WAY, a SAYS:
THE PV OF THE ANNUITY DUE IS GREATER THAN THE PV OF THE ORDINARY ANNUITY
Richard.Fendler: RIGHT????
Anh.Tran: b is also incorrect
Richard.Fendler: IS THIS CORRECT OR INCORRECT???????????
Richard.Fendler: HANG ON, LETS STAY WITH a
Richard.Fendler: IS a CORRECT OR INCORRECT?????
Anh.Tran: incorrect
Richard.Fendler: FROM WHAT I SAID ABOVE, a IS CORRECT, RIGHT?????
Richard.Fendler: THE PV OF AN ANNUITY DUE IS GREATER THAN THE PV OF AN ORDINARY
ANNUITY (BECAUSE YOU GET YOUR MONEY SOONER)
Kera.Astin: yes.
Richard.Fendler: AND IN TIME VALUE OF MONEY, THE SOONER THE BETTER (WHICH
MEANS, THE GREATER THE PRESENT VALUE).
Richard.Fendler: SO, THE STATEMENT (FOR 18) THAT: THE PV OF THE ORDINARY ANNUITY
IS LESS THAN THE PV OF THE ANNUITY DUE IS CORRECT!!!!!!!!!!!!!
Richard.Fendler: AND, IF YOU USE SIMILAR LOGIC FOR b, c AND d, YOU WILL FIND THE
THESE ARE ALL INCORRECT.
Maya.Green: yes
Richard.Fendler: SO, KERA, WHAT IS THE CORRECT ANSWER TO #18?????
Anh.Tran: A
Kera.Astin: A
Richard.Fendler: YES!!!!!!!!!!!!!!!!!!!!!!!!
Richard.Fendler: #16
Richard.Fendler: TRIPLE WOULD MEAN THAT FV IS 3 TIMES PV. SO, ASSUME FV = 3 AND PV
= 1 (OR ANY COMBINATION YOU WANT SO THAT FV IS 3 TIMES PV)
Richard.Fendler: OH, I DID NOT CAREFULLY READ THE QUESTION. SORRY.
Richard.Fendler: BUT IS IS THE SAME.
Richard.Fendler: IF PV IS 750, 3 TIMES THAT AMOUNT IS 2250. RIGHT?????
Kera.Astin: yes
Richard.Fendler: FOR THIS ONE, WE NEED TO FIND N.
Richard.Fendler: WHENEVER YOU ARE TRYING TO FIND N OR I/Y ON THE CALCULATOR,
WHAT MUST YOU DO?????
Richard.Fendler: ALWAYS!!!!!!!!!!!!
Maya.Green: make FV negative
Danyal.Qamar: Make PV negative
Richard.Fendler: MAKE PV NEGATIVE!!!!!!!!!!!!!!!!
Richard.Fendler: SO:
PV= -750
FV = 2250
I=8
CPT N
Richard.Fendler: OK??????????????????
Kera.Astin: yes.
James.Wallace III: ok
Richard.Fendler: ANY OTHER QUESTIONS ABOUT MC PROBLEMS????????
Maya.Green: gotcha
Quratul.Maya: no
James.Wallace III: #20
Quratul.Maya: # 27
Richard.Fendler: OK, WHAT ABOUT 27 TO 35???????
Kera.Astin: 20
Quratul.Maya: #32
Quratul.Maya: #34
Quratul.Maya: #41 and # 49
Richard.Fendler: (THE CORRECT ANSWER TO #20 IS d) - DOES THAT WORK FOR YOU
GUYS?????
Danyal.Qamar: 35
Kera.Astin: 33
Quratul.Maya: yes
Richard.Fendler: OK, 27, 32, 33, 34, 35, 41 AND 49 (FOR NOW)
Kera.Astin: yes
Quratul.Maya: yes
Richard.Fendler: #27
Richard.Fendler: FOR ANNUITIES, THE FV ON A CALCULATOR IS THE VALUE ON THE DAY
OF THE LAST DEPOSIT
Richard.Fendler: THUS, IF WE DO:
PMT = 2000; N = 40 (BECAUSE THERE ARE A TOTAL OF 40 DEPOSITS); I = 11.5; CPT FV
Richard.Fendler: THAT GIVES US THE AMOUNT AT THE END OF YEAR 39 (I.E., ON THE DAY
WE MAKE THAT LAST DEPOSIT). RIGHT?????
Richard.Fendler: NOTE THAT I USE N = 40 BECAUSE THERE ARE 40 DEPOSITS.
Richard.Fendler: BUT SINCE THE FIRST IS TODAY (I.E., IN YEAR 0), THE LAST ONE WILL BE
AT THE END OF YEAR 39
Richard.Fendler: OK???????????????
James.Wallace III: ok
Richard.Fendler: THEN, TO FIND THE FV ONE YEAR AFTER THE LAST DEPOSIT IS MADE,
YOU DO THE FOLLOWING:
Richard.Fendler: FV(END OF YEAR 40) = FV(END OF YEAR 39)(1.115)
Richard.Fendler: RIGHT???????????????????
Maya.Green: yes
Brijeshkumar.Mistry: yes
Richard.Fendler: FOR #32, IT IS BEST FOR CREATE A CASH FLOW TABLE AND FIND THE
ANNUAL DEPOSIT THAT WILL WORK. BUT IT IS A REAL PAIN TO CREATE A TABLE IN THE
CHAT BOX. SO, I WILL MAKE YOU A DEAL .....
Kera.Astin: ok
Richard.Fendler: IF YOU ALL PROMISE TO CAREFULLY LOOK AT THE SOLUTION KEY WHEN
I POST IT, I WILL TELL YOU THE CORRECT ANSWER FOR #32
Quratul.Maya: is (1.115) the answer?
Richard.Fendler: BUT YOU HAVE TO PROMISE ME YOU WILL DO THAT
Maya.Green: Pinky swear
Kera.Astin: I promise :)
Brijeshkumar.Mistry: promise
Anh.Tran: ok also formula #26 professor in the solution key
Zaneta.Anyaegbu joined the chat.
Richard.Fendler: QURATUL: THE ANSWER TO #27 IS:
FV(END OF YEAR 40) = FV(END OF YEAR 39)(1.115)
TO DO THIS, YOU HAVE TO FIRST FIND THE FV AT THE END OF YEAR 39 (AS I SHOWED
ABOVE)
Richard.Fendler: THE CORRECT ANSWER TO #32 ON THPS-3 IS
Quratul.Maya: thank you
Anh.Tran: Will it be posted ASAP on saturday?? I would want to reveiw all day since exam is same day
Richard.Fendler: 11,456.60
Richard.Fendler: I WILL POST THE SOLUTION KEY TO THPS-3 AT 6:00 AM ON SATURDAY.
James.Wallace III: What's the deal? lol
Kera.Astin: you have to look at it closely on the solution key when it is posted.
Richard.Fendler: THE DEAL IS YOU HAVE TO PROMISE ME THAT YOU WILL LOOK AT THE
SOLUTION KEY. VERY CAREFULLY!!!
Brijeshkumar.Mistry: is there anyways can you post solution keys by Friday evening?
James.Wallace III: got it...my chat box didnt scroll fro some reason
Kera.Astin: or move the exam to sunday? LOL
Richard.Fendler: JAMES - I WILL CHANGE THE THPS SUBMISSION FORM FOR YOU SO THAT
FOR YOU, #32 IS NOT 11,456.60
Maya.Green: ^^ that would be amazing
Richard.Fendler: BUT FOR EVERYONE ELSE, THE CORRECT ANSWER WILL BE: 11,456.60
Richard.Fendler: :)
Anh.Tran: hahaha poor james
Richard.Fendler: OK, LET'S GO AHEAD AND DISCUSS THE EXAM
Richard.Fendler: I AM THINKING ABOUT CHANGING EXAM TWO SO THAT YOU CAN TAKE
IT ANYTIME YOU WANT BETWEEN NOON ON SATURDAY AND MIDNIGHT ON MONDAY.
Quratul.Maya: still have 3 more questions to go right?
James.Wallace III: Man...you're tough on me
Richard.Fendler: BUT YOU STILL HAVE TO USE THE RESPONDUS LOCKDOWN BROWSER
PLUS WEBCAM
Quratul.Maya: that would be great
Richard.Fendler: WOULD YOU GUYS LIKE ME TO MAKE THAT CHANGE?????
Maya.Green: I would appreciate that change
Kera.Astin: YES PLEASE!!! That would be a great birthday present too me (my birthday is Sunday)
Savonne.Sutton: Please
Quratul.Maya: can we have one formula sheet along?
James.Wallace III: Sounds good!
Maya.Green: ayye cancer gang
Quratul.Maya: its just that these excels formulas
Richard.Fendler: HAHA. WELL, THE FACT THAT THIS WEEKEND IS KERA'S BIRTHDAY AND
SO FAR KERA HAS GOTTEN EVERY QUESTION CORRECT, SEALS THE DEAL.
Richard.Fendler: I WILL MAKE THAT CHANGE.
Maya.Green: thank youuuuu
James.Wallace III: Yay Kera!
Anh.Tran: Happy birthday KERA!! Im also a cancer! CANCERs rulleee
Kera.Astin: :)
Richard.Fendler: KERA - YOUR HARD WORK PRIOR TO THIS SESSION HAS PAID OFF BIG
TIME!!! YOU ARE THE CLASS HERO!!!!!!!!!!!!!!!
Kera.Astin: I try. I do try. I'm a finance major so I have to give it my all to make that B :)
Richard.Fendler: AND, I AM ALSO THINKING ABOUT THE FOLLOWING (BUT I FIRST NEED
TO HEAR IF YOU GUYS THINK THIS ONE IS A GOOD IDEA OR NOT)
James.Wallace III: Lets hear it
Richard.Fendler: I AM THINKING ABOUT MAKING ALL OF THE QUESTIONS ON THPS-3
WORTH 2.5 POINTS EACH. THAT WAY, IF YOU GET ALL 50 CORRECT, YOU WILL A GRADE
OF 125
Richard.Fendler: IF YOU GET 40 CORRECT, YOU WILL GET A GRADE OF 100
James.Wallace III: All points needed! lol
Quratul.Maya: 50 questions in exam ? what
Richard.Fendler: SO, TO GET A 100 ON THPS-3, YOU ONLY NEED TO GET 40 CORRECT.
Maya.Green: i like it
Kera.Astin: Hmmmmmm... I think that might be a good idea.
Richard.Fendler: THIS IS FOR THPS-3
Richard.Fendler: NOT THE EXAM
Savonne.Sutton: Yee
Quratul.Maya: i like the plan
Quratul.Maya: oh ok you got me scared
Savonne.Sutton: Yes good idea
James.Wallace III: Like it? I love it!
Brijeshkumar.Mistry: 40 questions in exam 2 , already posted announcement
Richard.Fendler: YOU WILL MOST LIKELY FAIL THE EXAM REGARDLESS OF WHETHER I
GIVE YOU MORE POINTS OR NOT.
Richard.Fendler: YOU WILL MOST LIKELY FAIL THE EXAM REGARDLESS OF WHETHER I
GIVE YOU MORE POINTS OR NOT.
Richard.Fendler: :)
Richard.Fendler: OR MAYBE THAT IS
:(
James.Wallace III: Man! lol
Kera.Astin: That is definitely a :(
Samia.Thobani: That is definitely :(
Maya.Green: oof :(((
Richard.Fendler: OK, EXAM 2 WILL RUN FROM NOON ON SATURDAY TO MIDNIGHT ON
MONDAY (BUT WILL REQUIRE RESPONDUS PLUS WEBCAM)
Richard.Fendler: AND
Richard.Fendler: FOR EACH QUESTION THAT YOU GET RIGHT ON THPS-3, YOU WILL
RECEIVE 2.5 POINTS
Richard.Fendler: SO, YOU CAN POSSIBLY GET A MAXIMUM GRADE OF 125.
Brijeshkumar.Mistry: sounds great!!!
Quratul.Maya: ok
Kera.Astin: Sounds good to me.
Maya.Green: thank you
Richard.Fendler: BACK TO THPS-3 QUESTIONS:
33, 34, 35, 41 AND 49
Richard.Fendler: #33
Richard.Fendler: YOU MUST SOLVE THE EQUATION:
EAR = [(1 + .0817/365)365] – 1
Richard.Fendler: THEN MULTIPLE YOUR ANSWER BY 100 TO GET A PERCENT. OK?????
Quratul.Maya: 8.51%
Kera.Astin: Ok
Richard.Fendler: #34
Richard.Fendler: BECAUSE THE PAYMENTS ARE ANNUAL, THE INTEREST RATE MUST BE
AN ANNUAL RATE. THUS, WE MUST FIRST FIND THE EAR.
Richard.Fendler: AS I SAID IN THE CHAPTER 7 VIDEO LECTURE (AND AS WE DID ABOVE)
FOR CONTINUOUS COMPOUNDING, WE CAN JUST ASSUME THAT q = 1000000.
Richard.Fendler: THUS, EAR = (1 + .10/1000000)1000000 – 1 = 0.105171 = 10.5171%
Richard.Fendler: OK SO FAR?????????????
Richard.Fendler: USING THIS RATE, FIND THE NPV OF ALL DEPOSITS: CF0 = 0; C01 = 1000; F01
= 1; C01 = 4000; F01 = 1; C01 = 9000; F01 = 1; C01 = 5000; F01 = 1; C01 = 2000; F01 = 1; CPT
NPV(I=10.5171%)
Richard.Fendler: THIS IS THE PRESENT VALUE OF ALL OF THESE CASH FLOWS.
Richard.Fendler: TO FIND THE FV EXACTLY 20 YEARS FROM TODAY:
PV = THE NPV YOU FOUND IN STEP ONE; N = 20; I = 10.5171; CPT FV
Richard.Fendler: OK???????????????
Richard.Fendler: #35
Richard.Fendler: I WILL MAKE YOU ANOTHER DEAL.
Richard.Fendler: (DEAL OR NO DEAL???)
Kera.Astin: What is it?
Richard.Fendler: :)
James.Wallace III: I'm ready this time
Anh.Tran: ill choose deal lol
Brijeshkumar.Mistry: deal
Richard.Fendler: IF ANYONE CAN TELL ME THE "KEY" TO MANY OF THE NAMES ON THPS-3,
I WILL GIVE YOU THE CORRECT ANSWER TO #35
James.Wallace III: What Anh said...lol
Anh.Tran: they are celebs??
Richard.Fendler: VITO SCALETTA, DAIGO DOJIMA, LISA HAMILTON, ELLY AND DINA, LINK,
Faheed.Choudhry: they're video game characters
Richard.Fendler: ELLIE AND DINA
Faheed.Choudhry: last of us 2
Richard.Fendler: YES!!!!!!!!!!!!! FAHEED JUST WENT TO THE TOP OF THE CLASS!!!!!!!!!!!!!!!!
Richard.Fendler: DOES ANYONE ELSE KNOW OF THESE NAMES????
Kera.Astin: GO FAHEED!
Anh.Tran: No i live in a bubble
Richard.Fendler: DO ANY OF YOU GUYS DO ANYTHING OTHER THAN SCHOOL WORK?????
James.Wallace III: Not me!
Kera.Astin: My fiance does, but I didn't.
Quratul.Maya: not me
Richard.Fendler: YOU NEED TO VENTURE OUT SOME
Maya.Green: yesss faheed *clap* *clap*
Kera.Astin: I go to work when I'm not doing schoolwork LOL
Richard.Fendler: THESE ARE ALL VIDEO GAME CHARACTERS.
Faheed.Choudhry: :)
Danyal.Qamar: Vito Scaletta - Mafia 2
Richard.Fendler: YES, THAT IS CORRECT!!!!
Richard.Fendler: A GREAT GAME.
Richard.Fendler: WHAT ABOUT NATHAN DRAKE????
Richard.Fendler: WHAT GAME IS THAT FROM????
Faheed.Choudhry: Uncharted
Richard.Fendler: YES!!!!!!!!!!!!
Samia.Thobani left the chat.
Richard.Fendler: OK, THE CORRECT ANSWER TO #35 IS:
Richard.Fendler: 644,213.58
Richard.Fendler: #41
James.Wallace III: Hey...I got one! Yippee!
Richard.Fendler: FIRST, YOU NEED TO CONVERT 75 MONTHS INTO A NUMBER OF YEARS
(BECAUSE THE INTEREST RATE IS COMPOUNDED ANNUALLY).
Richard.Fendler: 75 MONTHS = 75/12 = 6.25 YEARS. THEN:
PV = 175000 I = 3.99=; N = 6.25; CPT FV
Richard.Fendler: OK?????
Kera.Astin: ok
Richard.Fendler: #49
James.Wallace III: ok
Richard.Fendler: THIS IS A MISSING CASH FLOW PROBLEM.
Richard.Fendler: ENTER ALL CASH FLOWS INTO CF REGISTER WITH THE UNKNOWN CASH
FLOW = 0.
Richard.Fendler: THE NPV OF THE CASH FLOWS IS THE PV OF THE MISSING CASH FLOW.
Richard.Fendler: CF0=-5600; C01=1000; C02=950; C03=875; C04 = 0; C05 = 850; CPT NPV(I=3.785)
Richard.Fendler: THIS IS THE PV OF THE MISSING CASH FLOW.
Richard.Fendler: TO FIND THE MISSING CASH FLOW: PV=NPV YOU FOUND IN STEP ONE;
I=3.785; N=4; CPT FV
Richard.Fendler: THAT IS THE ANSWER.
Richard.Fendler: THAT IS THE ANSWER.
Richard.Fendler: NOTE: YOU CAN CONFIRM THAT THIS IS THE CORRECT ANSWER BY
GOING BACK TO CF REGISTER AND ENTERING C04= THE FV YOU FOUND
Richard.Fendler: IF THIS IS THE CORRECT ANSWER, THEN NPV OF THE CASH FLOW WILL
EQUAL ZERO, WHICH IT DOES.
Richard.Fendler: (IF YOU FIND THE CORRECT FV). :)
Richard.Fendler: OK??????????????????
Richard.Fendler: OK??????????????????
Richard.Fendler: ANY OTHER QUESTIONS????????????
Kera.Astin: ok
Anh.Tran: yes 26, 29.
James.Wallace III: ok
Maya.Green: 22 and 23 pls!!
Richard.Fendler: #22 AND #23
Richard.Fendler: #22
Richard.Fendler: IF THE INTEREST RATE IS THE SAME, THE SOONER YOU GET YOUR
MONEY THE BETTER.
Richard.Fendler: WHICH OPTION (INVESTMENT A OR INVESTMENT B) RETURNS MORE
MONEY SOONER?????
Richard.Fendler: MAYA?????
Quratul.Maya: b?
Maya.Green: b
Richard.Fendler: HAHA. THERE IS MAYA GREEN AND QURATUL MAYA. AND BOTH OF YOU
ARE CORRECT!!!!!!!!!!!!!!!!!!!!!
Quratul.Maya: plan a is 13350.86 and plan b is 13932.34
Richard.Fendler: AND THAT IS THE CORRECT ANSWER TO #22
Richard.Fendler: FOR #23, YOU WILL HAVE TO FIND THE PV OF EACH OPTION USING THE
RATES GIVEN IN a, b, c, d AND e.
Richard.Fendler: IF YOU DO THAT, YOU WILL FIND THE RATE THAT MAKES THE PV OF
BOTH THE SAME.
Richard.Fendler: OK??????????
Maya.Green: and would N be the year?
Richard.Fendler: MAYA - WHAT DO YOU MEAN?????
Richard.Fendler: I WOULD SUGGEST THAT YOU USE THE CF REGISTER.
Richard.Fendler: ENTER THE CASH FLOWS FOR INVESTMENT A AND FIND THE NPV USING
EACH OF THE DIFFERENT RATES.
Richard.Fendler: THEN DO THE SAME FOR INVESTMENT B.
Maya.Green: oh ok. then FO1 and so on would be the year
Richard.Fendler: FOR EXAMPLE (FOR INVESTMENT A):
CF0 = 0
C01 = 1500; F01 = 1
C02 = 2000; F02 = 1
C03 = 2500; F03 = 1
C04 = 3000; F04 = 1
C05 = 3500; F05 = 1
Maya.Green: im confusing myself. what would you put for CO1 and FO1. 1500 and 1?
Maya.Green: oh I see thank you
Richard.Fendler: THEN, INPUT I/Y = 3.3373 AND FIND NPV
THEN INPUT I/Y = 29.315 AND FIND NPV
AND SO ON
Anh.Tran: so for 23 is asking just PV and for 24, we use PV we found then find FV right?
Richard.Fendler: #26
AT RATE OF 1.8%: PV = 2.49; I = 1.8; N = 10; CPT FV
AT RATE OF 8.7%: PV = 2.49; I = 8.7; N = 10; CPT FV
THEN SUBTRACT THESE 2 AMOUNTS TO FIND THE DIFFERENCE
Richard.Fendler: ANH - IF THE PV OF TWO CASH FLOWS ARE THE SAME, THEN THE FV OF
THESE CASH FLOWS WILL ALSO BE THE SAME!!!
Anh.Tran: ok thank you
Richard.Fendler: AFTER YOU FIND THE PV OF EACH, YOU CAN THE FIND THE FV OF EACH.
AND THESE FV'S WILL "RANK" JUST LIKE THE PV'S.
Richard.Fendler: OK FOR #26???????????????
Richard.Fendler: #29
Richard.Fendler: #29
Richard.Fendler: 28 YEARS = (12)(28) = 336 MONTHS.
Richard.Fendler: PV = 20000; I = 2.95/12=; N = 336; CPT FV
Richard.Fendler: OK?????????????????
Richard.Fendler: ARE WE DONE FOR TONIGHT??????
Richard.Fendler: (THIS HAS BEEN A LONG SESSION ...)
Kera.Astin: I think so my brain needs a break LOL
Richard.Fendler: HAHA. I AGREE.
Richard.Fendler: LETS CALL IT A NIGHT.
Richard.Fendler: HANG IN THERE.
Quratul.Maya left the chat.
Maya.Green: thank you for the help
Kera.Astin left the chat.
Maya.Green left the chat.
Danyal.Qamar left the chat.
Tylar.Matthews left the chat.
Richard.Fendler: I WILL POST THIS TRANSCRIPT AND POST AN ANNOUNCEMENT ABOUT:
1. THE DATES FOR EXAM TWO
2. THE POINTS IDEA FOR THPS-3
Brijeshkumar.Mistry: thank you
Richard.Fendler: BYE