Financial Math Answers

a. Where do we use Present Value. Give three examples and explain how PV is used in these fields

Compare with examples the difference between compounding and discounting.

Melanie is deciding which of the two long term savings plan to choose for investing $9000: 6.2% per annum, compounding semi-annually, or 5.75% per annum compounded quarterly. If she plans to leave the money in the plan of 8 years, which is the better option?

A home was bought with a 20% down payment of R177 175,00. The balance was financed for 20 years at

9,4% interest per annum, compounded semi-annually. Find the size of the half-yearly payments for the loan.

a. John won a lottery worth $145,000 and she is expecting to buy a business in five years from now. He has been told by the bank that he would need about $350,000 to set the business in the future. What percentage of the business can be funded by the money from the lottery in 5 years from now. [Assume that interest will remain 7.7% unchanged. ]

b. Mr LEO’s father has made a will to give him an amount of $500,000 in 10 years .So Leo wants to borrow an amount from the bank to set up a fashion boutique in the nearest town. The business planner told him that he does not expect the present discount rate to change in these 10 years. The following information is given regarding the discount rate

  GDP growth of the country

1.2%

Beta

1.8

Index in January 2020

16,570

Index in December 2020

17,590

Inflation

2.5%

 REQUIRED

How much should he borrow from the bank now if he is planning to pay back the loan with the money he will get in 10 years of business return?

You purchase 75 shares of stock at $ 75 per share. The next day the stock drops 12%; however, a week later it increases in value by 5%. If you immediately sell your 75 shares, how much will you lose or gain (a) in dollar amount and (b) in percent?

Callum is saving for a new bike. He has $450 already and increases this amount by 25% with the money he makes at a garage sale, how much money does Callum have saved now?

Xolisile and Xolani are twins. To reward them for passing matric well, their parents gave them R20 000,00 each. Each one of them decided to invest three quarters of their money for a period of three years. Xolisile invested her money at a simple interest rate of 6,5% per annum. Xolani invested her money at an interest rate of 6,5% per annum, compounded annually.  What is the difference between the values of the two investments at the end of the period?

Set up an objective of your portfolio (high risk, low risk, target audience , benchmark ) objective should not exceed 250 words. 

4. Prepare returns for assets, compute beta, alpha of individual stock and protfolio as whole

5. Use solver function in excel to maximise returns and minimise risks.

6. Draw efficient market frontier of your data. 

7. Assuming you have held this portfolio for an year now. Comment on last years performance of your portfolio against benchmark (500 words maximum), write economic analysis (In this case USA if yu have selected companies from US Stock exchange) 250 words maximum along side industry analysis (250 words)

8. Students with highest risk and return ratio will be awarded an extra 2 marks as cherry on top for his stock selection.

sam is going to university this year. he wants to pay for his registration and buy himself a laptop so he can do his assignments and write his online exams. sam borrowed R15 000,00 from his grandfather at an interest rate of 9,5% per year, compounded monthly. Determine how much Sam will owe his grandfather after 5 years