Financial Math Answers

A dealer sells an article for GH¢600. He will allow you to buy it for GH¢240 down, with

the balance to be paid in GH¢30 monthly installments for a year. If you pay cash, he will

give you a 10% discount.

a. what is the interest rate j12 paid by the purchaser who uses the installments plan?

b. what is the annual effective rate being charged on the installment plan?

Suppose you have an extra RM100 today that you wish to invest in for one 

year. If you can earn 10% per annum on your investment, how much will you 

have in one year? 

 Rama pays RM18,300 on 15 October 2018 for a loan of RM18,000 made on a certain date.The simple interest rate is 3% per annum. Determine the term of the loan (in days) and the date of the loan.

FUTURE VALUE OF AN ANNUITY Your client is 40 years old; and she wants to begin saving for retirement, with the first payment to come one year from now. She can save $5,000 per year; and you advise her to invest it in the stock market, which you expect to provide an average return of 9% in the future.

a. If she follows your advice, how much money will she have at 65?

b. How much will she have at 70?

c. She expects to live for 20 years if she retires at 65 and for 15 years if she retires at 70. If her investments continue to earn the same rate, how much will she be able to withdraw at the end of each year after retirement at each retirement age?

uneven cash flow stream:

What are the PVs of the streams at 0% compounded annually?

0-------------1----------------2---------------3----------------4-------------5

stream a $0 $100 $400 $400 $400 $300

stream b $0 $300 $400 $400 $400 $100

a. Find the present values of the following cash flow streams at 8% compounded annually.

0-------------1----------------2--------------3-------------4-------------5

stream a $0------------$100--------$400--------$400---------$400---------$300

stream b $0-----------$300---------$400---------$400--------$400--------$100

You are in the process of finding out the value of H&K Company Ltd. The stock currently sells in the market at Tk.52 per share. The dividends paid by the stock over the last five years are:Dividend per share (Tk.) 2020- 3.30 2019- 3.08 2018 -2.86 2017- 2.70 2016-2.50 Looking at these dividend figures you conclude that the pattern of dividend payments has been steady and this pattern will continue in to unforeseeable future. The stock’s year-end market prices from 2016 through 2021 are given below: Year Market price per share (Tk.) 2020 37 2019 34 2018 31 2017 28 2016 26 During the same period the returns on the market as given by the market capitalization rate were as follows. Year Return on market 2019-20 26.50% 2018-19 20.00% 2017-18 19.89% 2016-17 19.74%The risk-free rate of return that is applicable to your investment is the interest rate on three-year term deposit, which is currently 8.5 percent. d. Calculate the required return on H & K stock e. Calculate the value of the stock

Assume that we have three assets. 

The first one has expected return μ1 = 10% and standard deviation of return equal to σ1 = 0.14. The second has expected return μ2 = 20% and standard deviation of return equal to σ2 = 0.2. The third asset has expected return μ3 = 15%.

We would like to determine the range of the standard deviation of the third asset so that non of the asset dominates another. 

This range is an interval with a lower bound a and an upper bound b.

What equals the lower bound a of the interval? Please insert your result with two decimals.

You buy a computer directly from the manufacturer for R7332, 00 and agree to repay it in equal installments over three years at the end of each month starting one month from now. The interest rate is 10,7% per year, compounded monthly. How much interest will you pay in total?

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