Hello all, the grades for quiz 3 have been posted. Below is the general analysis:
Q1- a) for this part you should sum two expressions and the result should be zero. Some only used one expression and only got half the mark. If a student achieved a result near zero (e.g., 1.33) They have been given full mark.
Q1-b) This part has 3 marks, which are distributed as the following: one mark has been assigned to mentioning that the investment opportunity return is the same as investor's required ROR. One mark has been assigned to the student's advice, saying that the project is worthwhile. One mark has been assigned to substantiating your advice. If a student has given the wrong advice, it is likely that they have received 0 marks for Q2-b. The reason for this decision is that giving the right advice is central in this part, and the rest of the question evolves around the advice.
Q2-a) full marks have been given to the right final answer. Partially correct answers have received partial marks.
Q2-b) full marks have been given to the right final answer. However, if the final answer is not correct, one mark has been given to "total payment" and "mortgage reduction", respectively, if the terms are calculated correctly.
Q2-c) full marks have been given to the right final answer. Partially correct answers have received partial marks.
Q3-d) This part has 3 marks. One mark is assigned to each of the following terms: market value increase, down payment, debt reduction.
Q4-a) This question was a bit challenging for most students. For part a, four marks have been assigned to the correct form of the NPV, which is written bellow:
0 = 300,000 + (15)*(10000)*(1.06) *(P|A i, 6% , 6) -7000(P|A i,6) - 8.5*(10000)*(1.06)*(P|A 6%,6)
If a student has written the above mathematical statement they are given 4 marks. Next, the students should try and use linear interpolation and solve for i. The linear interpolation part has 4 marks. It should be mentioned that partial answers were given partial marks, and I tried to give marks wherever I could.
Q4-b) one mark has been assigned to stating the problem of IRR method: that it assumes cash flows are reinvested at IRR rate. This could cause a problem in ranking projects. Another one mark has been assigned to student's suggestion of whether or not we should rely on the answer of part (a).
Wishing you the best of luck on your finals. Fighting.
Quiz 3 Analysis