Week 3 Learning Team Problems

Week 3 Learning Team Problems 1 FIN/420 Version 4 University of Phoenix Material

Complete the following problems as a team:

 Assume that you are choosing an investment for your retired parents. What are the advantages and disadvanges of each of the following?

o a bond issued by the federal government, o a state or local government, o or a corporation?

 Which would you recommend for your retired parents? Justify your answer.

 Five years ago, you purchased a $1,000 corporate bond issued by General Electric. The interest r ate for the bond was 5%. Comparable bonds are paying 6% today.

o What is the approximate dollar price for which you could sell your General Electric bond?

o In your own words, describe why your bond decreased in value.

 Sidney took a $200 cash advance by using checks linked to her credit card account. The bank ch arges a 2% cash advance fee on the amount borrowed and offers no grace period on cash advances. Sidney paid the balance in full when the bill arrived.

o What was the cash advance fee? o What was the interest for 1 month at an 18% APR? o What was the total amount she paid? o What if she had made the purchase with her credit card and paid off her bill in full promptl y?

 Retirees often make a choice between the following: What are the advantages and disadvantages of both.

o 1) taking a lump-sum pension payout and purchasing an annuity (or having the company convert their benefit to an annuity for them) or

o 2) using the lump-sum payout to purchase a portfolio of bonds intended to provide them a n income stream. Compare the advantages and disadvantages of each strategy.