Financial Math Answers

What annual deposits are needed for 10 years to provide for a perpetuity of $3000 per year with the 1st payment due at the end of 11, 1 year after the final deposit with J1 = 8% p.a.?

Mr. R has bought call and put options. The contract consists of 100 shares. Mr. R purchased a 3-month call option with a strike price of $57 and $2 as premium. He paid $2 per share as premium for buying 3-month put option with a strike price of $55. What will be the situation of Mr. R if the stock price increases to $59 in 3 month or if stock price reduces to $50 in 3 months

Esther, Vida, and Clair were asked to consider two different cash flows: GH¢1000 that they
could receive today and GH¢3000 that would be received 3 years from today. Esther wanted
the GH¢1000 today, Vida chose to collect GH¢3000 in 3 years, and Clair was indifferent
between these two options. Which of the three women made the right choice? Explain

Esther, Vida, and Clair were asked to consider two different cash flows: GH¢1000 that they could receive today and GH¢3000 that would be received 3 years from today. Esther wanted the GH¢1000 today, Vida chose to collect GH¢3000 in 3 years, and Clair was indifferent between these two options. Which of the three women made the right choice? Explain

A loan of $500 is to be paid with two payments of $300, one in 3 months, and another in 6 months. The compound interest charged per-annum on the loan is:

You bought a sachet water machine from Indie Inc. The cost of the machine was GH¢35,000. At that time, you asked for the payment to be deferred, and a contract was written. Under the contract, you could delay paying for the sachet water machine if you purchased the material for packaging the water from Indie Inc. You will then pay for the machine in a lump sum at the end of 2 years, with interest at a rate of 2% per quarter-year. According to the contract, if you ceased buying the packaging material from Indie Inc. at any time prior to 2 years, the full payment due at the end of 2 years would automatically become due. One year later, you decided to buy the packaging material elsewhere and stopped buying from Indie Inc., whereupon Indie Inc., per the contract terms, asked for the full payment that is due at the end of 2 years to be paid immediately.

Your company estimates it will have to replace one of its delivery cars five years from now. The replacement is estimated to cost not less than Gh 160,000, which it plans to finance by depositing an equal amount at the end of each month into an account with a return of 0.90% per month. What is the amount to be deposited each month in order to realize the required amount?

It require an investment of $1Billion in a new machine for car interior decoration.
Demand for the company’s car is expected to begin at 100,000 units in year 1, with 10% annual growth thereafter. Production cost will be $35,000 per unit in the first year, and increase by a rate of either 3% or 5% per year as a result of wage increase. Selling price will start at $37,000 and increase by 4% of the production cost. The model will be phased out at the end of year 10. In addition, 0.3%, 2% and 1.5% of before tax profit per year will be spent on social corporate responsibility, commercial (including promotions) and recalls respectively. Assume taxes will be 30% of yearly profit and that inflation will remain at 0% per year throughout the 10 year of production. Also assume interest rate is expected to be 3% per year in the first 5 years and 5% in the last 5 years. a. Based on present worth analysis, is it profitable if production cost increases by a rate of 3% per year as a result of wage increase?

b. You bought a sachet water machine from Indie Inc. The cost of the machine was GH¢35,000. At that time, you asked for the payment to be deferred, and a contract was written.You will then pay for the machine in a lump sum at the end of 2 years, with interest at a rate of 2% per quarter-year. According to the contract, if you ceased buying the packaging material from Indie Inc. at any time prior to 2 years, the full payment due at the end of 2 years would automatically become due. One year later, you decided to buy the packaging material elsewhere and stopped buying from Indie Inc., whereupon Indie Inc., per the contract terms, asked for the full payment that is due at the end of 2 years to be paid immediately. You were unhappy about this, so Indie Inc. offered as an alternative to accept the GH¢35,000 with interest at 10% per semiannual period for the 12 months that you had been buying the packaging material from Indie Inc. Which of the alternatives should you accept? Explain.

John bought a car worth $29,000 by taking a bank loan. He pays $5,000 initial deposit and agrees to pay $600 at the beginning of each month as long as necessary. What is the number of full payments he needs to make if interest is J12 = 12%?