The Gnome of Zurich
Contents
1. Another Problem 12 button Calculator error 8 button Click here to proceed 3 button Enter 5 button Go back 9 button Quit 3 12 button Skip to next 9 button Solution 12 compounding schedule 5 14 effective interest rate 6 14 Emergencies 13 Floppy disk installation 1 Future Value 14 Hard disk installation 1 inflation rate 6 14 Interactive Lessons 4 MultiFinder 2 Nominal Interest Rate 14 Present Value 14 RAM 2 real interest rate 6 14 speech bubbles 6 trial and error 2 10 Instructor s Supplement A major stumbling block for many students is that their previous training has provided insufficient opportunities for them to master the elementary principles and routines which are the nuts and bolts of Finance The Finance Tutor is intended as a supplement to textbooks and lectures which allows students to browse at their own pace and provides drills in practical problems and intelligent feedback explaining mistakes The Finance Tutor is a HyperCard stack for use on Apple microcomputers in Colleges and Graduate Schools of Business which incorporates animated graphics and sound effects The Tutor comprises a series of animated lessons with interactive exercises When students have difficulty mastering the basic quantitative methods of fi nancial analysis the underlying problem is frequently the shortage of opportunities to progress through the steps of the learning process in2. a personalized order Textbooks and lectures follow a serial structure whereas HyperCard allows the browser to navigate through the material in any order pursuing questions as they arise In addition the computerized Tutor can tirelessly review material and provide intelligent guidance until the student masters it at his or her own pace significantly reducing frustration Since HyperCard software is now provided with all Apple Macintosh computers many students will be able to work with the Finance Tutor stack at home An attractive feature of HyperCard is its ability to create animated sequences Such events are incorporated to illustrate the dynamics of financial transactions in ways that cannot be achieved on the printed page or even in the classroom The practice problems also offer a considerable advantage over printed problem sets by allowing each student to practice as much as he or she desires In learning to do financial calculations there are several pitfalls which account for the majority of incorrect answers by students The rule base of the Tutor anticipates these common errors in order for the Tutor to be able to tell the student why an answer is wrong The Tutor s problem generator is designed to tirelessly create new problems to give students practice with a separate hand held financial calculator The problem generator randomly selects one of three types of problem present value of a lump sum future value of a lump s
3. no more than 15 Also in any given year prevailing interest rates are usually Figure 4 1 Input data by pointing and clicking on the desired digits to enter a number Click on the button Enter when you are ready to proceed How much money is invested today Please point and click with the on screen keypad to enter data or type on the keyboard higher than the inflation rate The Tutor will still work if you provide unusual inputs but the resulting displays may not be very meaningful In particular time horizons less than 40 years are recommended for meaningful graphics When you are finished inputting a number point and click on the button Enter at the lower right hand corner of the keypad If you want to return to the Menu card click on the button at the lower left hand corner of the screen Figure 4 2 Use the on screen keypad to enter an interest rate by pointing and clicking After clicking on enter wait for a prompt asking you to select the compounding schedule What is the annual interest rate Please use the keypad at left to enter data or type on the keyboard emi annual compounding After you click on the button Enter new keypads will appear requesting other data The Finance Tutor s next request will be for an interest rate input Please give the interest rate as a percent such as 10 When you are satisfied with the entry click on the Enter button and then you will be a
4. too high Pt your calculator is not set for the right number of compounding period year ar you have rounded the answer incorrectly Re enter the data e j again Calculator error After providing several problems in calculating future values the problem set shifts to some exercises in calculating effective interest rates If this concept is not yet firmly established through the previous lessons help is available simply by clicking on the button Help illustrated in Figure 4 8 This launches an animated sequence that illustrates the effective interest rate using the numbers in the problem Figure 4 8 The Help button available with the effective interest rate problems Prob 14 For interest of 10 compounded semi annually what is the effective rate e LN Calculator error E Go Back 43 Advanced Problem Generator The Advanced Problem Generator tirelessly creates new problems for as long as you like When you enter this level the cursor will automatically move to the answer field and blink to show where it is the finger is pointing to the answer field in Figure 4 9 Simply calculate your answer and type it on the computer keyboard No two problems will be exactly alike and the Tutor mixes problem types at random Tutorial advise is also available at this level to help diagnose incorrect answers If you cannot solve a problem yourself you may ask for the solution by pointing and clicking on the butto
5. Rate The effective rate is the interest rate with annual compounding that would have the same effect as a given APR with more frequent compounding For example a credit card account that charges 1 5 per month equates to an APR of 18 but the effect is the same as 19 56 with annual compounding Future Value The future value is the amount of money that will accumulate at a future date as the result of investing a specified amount today Inflation Rate The inflation rate is the compound rate of growth in the price level as defined by the Consumer Price Index GNP Deflator or some other recognized index of the growth in prices of goods and services Nominal Interest Rate The nominal interest rate is the compound rate of growth in the dollar amount of the investment without adjusting for the adverse impact of inflation on the purchasing power The nominal interest rate is what most people think of when considering investment performance but it generally overstates the real performance of an investment Present Value The present value is the amount of money that must be invested today at compound interest to grow to a specified amount in the future Real Interest Rate The real rate is the rate of growth in the purchasing power of an invested sum after adjusting for the adverse impact of inflation Index Integrated Lesson 3 advanced problem generator 7 12 Annual Percentage Rate 14 beginning level practice problems 7 button
6. The Gnome of Zurich The Time Value of Money Module of Finance Tutor User Manual March 1992 John W Kensinger Ph D Department of Finance University of North Texas Denton Texas 76203 940 565 2511 Voice 940 565 4234 FAX The effective nominal as Future Value interest rate is 10 382 44 1 628 62 The effective real interest Because af inflation the rate is 2 90 jus amount to be received 5 years srr from now will purchase as much as 1 156 21 could buy today Present Value kes Purchasing Power 1 000 00 em 1 158 21 T Click here to proceed 1992 John W Kensinger This copy provided by the developer for home campus use by University of North Texas students Do not distribute off campus Commercial version available from Intellimation Library for the Macintosh 130 Cremona Drive P O Box 1922 Santa Barbara CA 93116 1922 Contents 1 Installation Procedures uu ccccsssssssscsccccscsccsssssscsssssscsccssccscescsssssssssscesees 1 2 Introductionis oio zeolite orta t epus ede rR Tone o TUS 1 21 OVervVleWiuniuhushsuseegave eec re eee ETE Ee d cies 1 Ze ARO SS ss szncvent eit dioi teens acp E ER rede D 2 2 3 Additional Requirements dct atia taie 2 24 Dysteny Requirermerits un oiv ii aia 2 3 Getting Started ace iaceat ideis ip qe IP VH EUR BARRE eee DXEa ea 2 i Using th Prograf and itia ctt obo aai 4 4 1 Interactive LessonS s e sscssersresessersesrccresssseerrccsrsss
7. e 4 6 The Tutor s response to the common error of using the wrong compounding schedule At 10 interest compounded annually what will 1 000 grow to in 10 years lt gt Le You have used monthly compounding Please try again with interest compounded annually Calculator error Go back Skip to The Finance Tutor is capable of recognizing a variety of mistakes that beginning students commonly make If the answer is wrong the Tutor offers suggestions in a suggestion field that zooms open automatically this field can be whisked away simply by pointing and clicking on it with the mouse The Tutor also automatically highlights the answer field so that a new answer can be entered simply by typing on the computer keyboard Figures 4 5 and 4 6 show the Tutor s response to two of the common causes of error Even if the answer does not fit a specific syndrome the Finance Tutor provides guidance Figure 4 7 shows the Tutor s response to an answer that is close but not close enough As you can see the guidance is specific enough that the user can work with this feature to find the correct answer by trial and error In fact this is a very beneficial exercise that is highly recommended Figure 4 7 The Tutor s response to a guess that is close but not correct At 10 interest compounded annually what will 1 000 grow to in 10 years 9 LN i Your answer is close but nat quite right an It is a little
8. lastic tab in the corner of the disk so that it covers the hole if the disk is locked the animation will not function Then open the Finance Tutor disk by double clicking on its icon and double click on the icon of stack Gnome Then follow the procedures in section 3 Getting Started The practice problems are designed for use with a separate hand held financial calculator providing bottomless opportunities for practice with instant feedback and tutorial assistance If a financial calculator is not available a generic substitute is provided on screen for use with selected problems 2 Introduction 2 1 Overview The Finance Tutor s time value of money module The Gnome of Zurich is a HyperCard stack for use on any Macintosh It includes a series of tutorials with sound effects and animated graphics to illustrate the combined effects of compound interest and inflation It also includes interactive exercises that provide drills in practical problems and intelligent feedback explaining mistakes These practice problems are designed expressly to be used with a separate calculator or set of compound interest tables depending upon the course instructor s choice The intent is to avoid becoming dependent upon the Finance Tutor for calculations but instead to wean the student as soon as he or she is ready 2 4 Purpose Mastering the elementary principles and routines that are the nuts and bolts of Finance can be a major s
9. n Solution If you want to pass on to another problem point and click on the button Another Problem and a new one will be created immediately When you are ready to exit the problem generator point and click on the button Quit Figure 4 9 The advanced problem generator Find the present value of 739 to be received in 14 years discounted at 10 252 interest compounded semi annually Give answer to the nearest cent Show Solution Another Probl 44 Coping With Emergencies The Time Value of Money Module has been extensively tested but just in case an unforeseen glitch should develop here is what to do to get the situation under control Action can be stopped at any time by simultaneously pressing the Command and Period and keys on the computer keyboard Then call up the message box by pressing the Command and M keys simultaneously type menu into the message box and press the Return key Glossary Annual Percentage Rate APR The annual percentage rate is the rate per compounding period multiplied times the number of compounding periods per year For example a credit card account that charges 1 5 per month equates to an APR of 18 Compounding Schedule The compounding schedule describes the frequency of compounding For example with annual compounding interest is added to the principal once each year with with monthly compounding the interest is added once each month etc Effective
10. ng the Command key and the M key simultaneously Then type menu or quit into the message box and press the Return key Figure 3 2 The menu screen is the key to navigating through the tutorial options or quitting the tutorial session For a first time user the button Start Integrated Lesson is recommended Menu 1 Start Integrated Lesson C a Compound Interest Demonstration b Inflation Demonstration c Real Growth Demonstration 12 Practice Problems Fusce cursar ef ihe desires CHOICE ang cROE Phe maus 4 Using the Program 4 4 Interactive Lessons The Gnome of Zurich is easy to use and during the tutorial requires only some user interaction with on screen buttons There are no other chores to do or data to save just watch interact and learn There are three tutorial sequences each of which can be repeated as often as the user desires When you launch one of the lessons you will be asked to provide input via on screen keypads All that is necessary is to think of a realistic number move the cursor to point out the desired digit and click the mouse The digit will appear in the rectangular field at the top of the keypad If a change is desired click on the clear button When the Gnome requests a dollar amount avoid unusually large or small amounts such as 1 000 000 000 000 or 13 Likewise the interest rate is normally in the range between 5 and 25 per year and inflation is generally
11. onstrations The Tutor is most effective if students begin using it early in the course of instruction and have it available for review throughout the semester Field Testing The time value of money module of the Finance Tutor has been lab tested with graduate and undergraduate students in the College and Graduate School of Business University of Texas at Austin during the 1990 91 academic year These tests have led to extensive debugging to insure user friendliness The Tutor is now safe for extended periods of unsupervised use by students working in a computer lab or at home
12. pe over it using the computer s keyboard when you have calculated your answer the solution to this one is 2 593 74 If your calculator returns an error message point the cursor at the button Calculator error and click the mouse If you want to clear the answer field press the Tab key The answer field will be highlighted and ready for a new entry to be typed over the old one erasure is automatic with the first new keystroke When you are satisfied with your answer do any one of three things press the Return key press the Enter Figure 4 5 The Tutor s response to the common error of giving the present value when the problem asks for the future value At 10 interest compounded annually what will 1 000 grow to in 10 years You have calculated the present value The problem asks for future vi Please tri again Calculator error key or click the mouse on the Ready button Any of these steps will launch the diagnostic routine If you don t have a financial calculator handy the Tutor will offer you the option of using the animated data entry sequence for selected problems The Tutor will then automatically insert the answer into the Answer field and sent a mouseUp signal to the Ready button Once in the problem set you can navigate around using the button Skip to next or the button Go back These are located in the lower right corner of the screen Figur
13. rest rates and the consequences of inflation using a hand held financial calculator A dialogue box will ask you whether you want the beginning level set This level offers comprehensive help messages to aid in becoming comfortable with financial calculators plus extensive diagnostics to help identify the reason for a wrong answer Alternatively you may choose to proceed directly to the advanced problem generator that will challenge you with new problems for as long as you like The help messages and diagnostics are not as extensive at this level however so the best strategy is to master the beginning level problems first Figure 4 4 First card of the beginning level problem set At 10 interest compounded annually what will 1 000 grow to in 10 years Calculator error If you choose the beginning level a dialogue box will ask whether you have a financial calculator If you say no the Tutor will offer you the option of using the animated data entry sequence for selected problems or you can browse and do some problems by trial and error with the guidance of the built in diagnostics Figure 4 4 shows a picture of the screen you will see for the first problem When you get to this card there will be a short animated sequence to provide introductory instructions about using the help function and entering answers The answer field will be highlighted and contain a short help message You need not erase this message just ty
14. sessecsress 4 42 Practice Problems assai ebbe eee est 7 4 3 Advanced Problem CGenerator esee 12 44 Coping With Emergencies ient ttr tinent 13 MSI OSS ALY A 14 VON OEC S M 15 Instructor s Supplement caivaisscheracsesaciasaseseceisacsdsassacsasecsatbassensesades 16 Curriculum TC STATON issn usi roseis iR odetre cete idt tavacrnannn goes 17 Field Testing oo aed eo vd e Dee ana dut dpi ostia 17 1 Installation Procedures The time value of money module of the Finance Tutor is a self contained HyperCard stack and can be run from a floppy disk or installed on a hard disk simply by dragging the icon of the Gnome stack The Finance Tutor requires HyperCard version 2 0 or higher Its fields use the Geneva font in 12 14 and 18 point sizes which are part of the standard system configuration If they are not present on your system please install them from the fonts included in the standard package of utilities shipped with each Macintosh e Hard disk installation First install HyperCard Then insert the Finance Tutor disk open it by double clicking on its icon and drag the icon for the Gnome stack to the hard disk Floppy disk installation Install the system disk with HyperCard and the Home stack in drive 1 and the Finance Tutor disk in drive 2 The Finance Tutor disk must be unlocked by pushing the small p
15. sked to select a compounding schedule annual compounding quarterly compounding etc from the choices on the screen After selecting the desired compounding schedule press the button in the lower right hand corner to proceed The keypad used to input an inflation rate looks much like the interest keypad and works the same way Next comes an animated sequence showing how money grows with compound interest or shrinks with inflation At the end of the sequence you will be asked whether you want to repeat with new numbers or proceed to the next level Figure 4 3 This screen offers you a choice between the beginning problem set and the advanced problem generator You have a choice between a beginning set of practice problems with extensive tutorial help or an advanced set that will generate new problems for as long as you like Click here for the next prompt During stop action pauses in the animated sequence you will see speech bubbles from time to time like this These give the opportunity for a deeper look at concepts such as the effective interest rate or the real interest rate If you want to explore just point the cursor at the speech bubble and click the mouse 42 Practice Problems After participating in the animated lessons the next step is the practice problem level You may choose a set of 50 beginning level practice problems that reinforce the capability to compute present value future value effective inte
16. this is a useful exercise and is highly recommended 24 System Requirements The Finance Tutor works with any Macintosh computer capable of supporting HyperCard version 2 0 This requires a minimum of one megabyte of RAM with a hard disk or dual floppy disk drives MultiFinder cannot be used when only one megabyte of RAM is available however 3 Getting Started Open the stack Gnome by double clicking on its icon which looks like this 7 Gnome Then sit back for a few seconds and watch the introductory animated sequence during which the cursor disappears Figure 3 1 When the animation stops click on the button in the lower right corner This module focuses on compound Interest and its nemesis inflation Click here When the introductory sequence stops and the cursor reappears move it to the button Click here to proceed and click on it This is illustrated in Figure 3 1 The next card sequence provides some basic instructions Keep using the button Click here to proceed until you come to the Menu Then select your destination by pointing with the cursor and clicking the mouse For a first time user the Integrated Lesson is recommended You will be offered many opportunities to return to the menu and can quit the tutorial session at any time by choosing the button Quit at the bottom of the menu If a Menu or Quit button is not present on a card you can open the message box by pressi
17. tumbling block for many students The animated se quences illustrate the dynamics of compound interest and inflation in ways that can never be achieved on a printed page or blackboard making the concept of time value of money come alive Finally the program is interactive fostering involvement by the user and therefore enhancing the learning process The exercise components also offer a considerable advantage over printed problem sets by providing tailored feedback and tirelessly generating new problems for as long as the user wants to continue practicing In learning to do financial calculations there are several pitfalls which account for the majority of incorrect answers by students and the rule base of the Tutor recognizes these common errors in order to tell the student why an answer is wrong and give advice that will lead to the correct solution 23 Additional Requirements The problems are designed to provide feedback for students working with a separate financial calculator or set of compound interest tables These are the basic tools most Finance teachers require their students to master If a calculator is not available the Tutor s animated sequence can be used to solve selected problems but this is not as effective at strengthening the user s capability to solve problems independently The Tutor provides enough feedback however that it is even possible for the user to quickly discover the solution by trial and error Indeed
18. um or effective interest rate It then randomly chooses the life of the investment from 2 to 25 years a dollar amount between 100 and 1 000 and an interest rate between 5 and 20 Interest rates may also include a fractional component of 1 4 1 2 or 3 4 of a percent When compound interest tables are used instead of calculators interpolation will often be required To reduce frustration the Tutor counts as correct any answer that is within plus or minus 0 5 of the correct solution In addition the Tutor gives so much feedback in response to incorrect answers that a user could find the solution by trial and error Indeed this is a useful exercise for helping students develop good financial instincts Curriculum Integration The Finance Tutor is aimed at MBA or undergraduate students in the core finance course and is also useful for students in accounting courses The Tutor can accelerate students past the basics and on into more challenging and interesting topics and may even open the field of finance to students who otherwise might not overcome the initial hurdles The Tutor requires very little prior exposure to formal training in Finance and can be offered at the beginning of the course Unfamiliar concepts such as effective interest rates and real interest rates are developed via animated presentations and additional help is provided via speech bubbles that open additional information or launch further animated dem
Download Pdf Manuals
Related Search