联系我们： 手动添加方式: 微信>添加朋友>企业微信联系人>13262280223 或者 QQ: 1483266981

Assignment: Part A, Financial Mathematics and Security Valuation
See Blackboard for due date:
General Information
Marks: 10 – ten questions each worth one mark. You must have the correct answer and a correct explanation plus working, to gain the marks allocated to each question (you must provide two solutions, one as if you were answering the questions for the exam [but typed] and one in excel). Failure to provide both will result in a mark of zero for the question. Include cash flow maps and/or tables wherever possible. Avoid rounding error. Providing a formula and the final answer, without showing the working is not enough.
Weight: 10%.
Format: Calculation and brief working or short answer with explanation as well as the calculation solved in an Excel spreadsheet. For each calculation you must provide a manual solution and a solution using excel. Typing straight into excel without doing the calculations in excel does not qualify as solving in excel. Use the excel template provided. Do all the assignment with explanations in excel and upload one file. Type your explanation and manual answer in text boxes. See the example file provided on Blackboard.
Word Limit: A few pages (500 words as a very rough guide; mostly calculations)
Due: see Blackboard
The assignment must be done in excel and must be your own work (scanned documents are not acceptable). Under no circumstances should you use submit a hard copy.
Make sure to highlight or underline your final answer/s in some way. (e.g. Answer = $5089)
Upload a soft copy of your Excel file to Blackboard under Assessment by the due date and time (must be Microsoft compatible). Failure to upload will result in a mark of zero. Keep a copy of your assignment. If you have problems uploading your file/s then send them by email (before due date and time) to seungho.choi@qut.edu.au
Late submissions will receive a mark of zero. Please be aware that the suggested solution will be released within one day or so of the submission date, so any assignment submitted after the due date and time will attract a score of zero.
48-hour extension is not available for this assignment. Extensions will only be granted in very, very exceptional circumstances, and will normally take the form of a different assignment.
A hard copy is not required.
Try to be as accurate as possible. Unless otherwise told you should use the following approach:
PV and FV accurate to the nearest dollar
Prices accurate to two decimal places (to the nearest cent)
Rates accurate to one basis point
To avoid mixing up assignments, save and name your assignment using the following format:
unit code, your last name, your first name, your student number, and assignment number
for example: EFN406 last name first name n1234567 Assignment Part A
Save your file in excel using this name and then upload it to Blackboard.
Question 1
?
Now that she has accumulated a deposit of $200,000, Wendy wishes to use this deposit and take out a housing loan to purchase a home. The home costs $900,000. The loan is to be repaid in equal quarterly instalments over a term of 15 years. Wendy recalls that the interest rate quoted by the bank is an annual nominal rate of 3.2%pa compounded quarterly. After 5 years (20th repayment just about to be made), Wendy gets a large bonus at work and decides to pay out what is owing on the loan.
?
(i) How much is the quarterly repayment?
(ii) How much is owed at the time of the pay out?
(iii) Provide Wendy with a repayment schedule using excel at the time the loan is made.
(Answers should be accurate to the nearest dollar)
Question 2
?
John is going to establish a University Fund for his daughter Mary, who has just been born. He plans to make the first deposit of $20,000 today and then annual deposits of $5,000 will be made until Mary’s 17th birthday. Given the long term nature of the investment, John anticipates a 5% pa return. The money is transferred to an account for Mary on her 17th birthday and she will then withdraw the money in equal annual amounts for 5 years starting on her 18th birthday. Mary will only be able to earn 3% pa on her money.
?
(i) How much money will be available on Mary’s 17th birthday?
(ii) How much will Mary be able to spend each year?
(Your answers should be accurate to the nearest dollar)
Question 3
?
There are two options to purchase a car: 5-year loan vs. lease the car.

The price of the car is $50,000. If you purchase the car, you are going to pay it off in monthly payments over the next 5 years at an annual percentage rate of 6.99 per cent. You expect to sell the car for $28000 in five years. If you lease the car, you have to pay 20% of the price of the car today and $550 per month for the next five years. Should you lease or buy the car? What break-even resale price in five years would make you indifferent between two options?

(Your answers should be accurate to the nearest dollar)

Question 4
?
Ella has just retired and has received a lump sum pay-out of $1,800,000. She invests part of this pay-out in a perpetual investment which earns 4% per annum and provides a perpetual income to her of $30,000 per year (assuming end-of-year withdrawals). She puts the rest of the pay out in another investment in the form of a growing perpetuity (growth rate of 2% pa) which earns 4% pa. She wants to make annual withdrawals (starting in one year) from this growing perpetuity to fund some holidays.
?
Required
(i) Calculate how much Ella has invested in the perpetual investment.
?
(ii) Show how much extra Ella can expect to spend each year (assuming end-of-year withdrawals), over and above the $30,000 from the perpetual investment, from the growing perpetuity. Note: ignore tax in your calculations.

Question 5
?
Your supervisor has asked you to do the following calculations:
?
(a) A bank bill with 120 days to maturity is issued with a yield of 0.05% pa. Face value is $1,000,000. Calculate the issue price of the bill.
?
(b) The bill in part (a) is sold after 10 days at a yield of 0.15% pa. Calculate the selling price.

Question 6
?
Emma buys a bond with a face value of $100, a time to maturity of 5 years, a coupon of 2% pa with semi-annual payments and a yield of 2.4% pa. Three year’s later (immediately after the sixth coupon has been paid), the Reserve Bank of Australia unexpectedly decreases the cash rate. The yield on Julie’s bond decreases to 1.2% pa and she decides to sell.
?
Required
Calculate the buying and selling prices. Discuss why the price has changed.

Question 7
?
Polycorp plans to pay a dividend of $6 in one year’s time. Dividends are then expected to increase by a $1 a year for 5 years. After that they are expected to grow at 2% pa forever. Shareholders required return on equity is 11% pa. What is the estimated value of Polycorp shares?

Question 8
?
The required rate of return on the shares in the companies identified below is 9% pa. Calculate the current share price (ex-dividend) in each case.
?
(a) The current earnings per share of Alpha Ltd are $10.00. Earnings are expected to remain constant for the next three years. For the next 3 years, Alpha anticipates having to put half of its earnings back into the business to maintain the level of earnings. After this it is expected that all earnings will grow by 3% pa and all earnings will be able to be paid out as dividends.
?
(b) Gamma Ltd is planning to reinvest earnings and not pay dividends until year 4, when a dividend of $6 is expected (D4 = $6). Dividends are expected to remain constant after that.
Question 9
?
Your client wishes to insure their Lamborghini. PMA Insurance has quoted an annual premium to insure the car of $50,000. PMA offers two other payment methods. The account can be paid in full by making 12 equal end-of-the month payments of $4,500. Alternatively two semi-annual payments (the first immediately) of $26,000 can be made. The appropriate interest rate to make the comparison is 6% pa compounded monthly. Which of the three options should you choose for your client?
?Question 10

You are offered the choice of the following two income streams; –
$300,000 every 3 years in perpetuity with the first receipt in 3 years.
$26,000 every month for 10 years with the first receipt immediately.
The annual interest rate is 3.6% pa.
_x005f
Which income stream do you choose?