Financial Math Answers

Suppose a project requires an initial investment of ＄2000 and it is expected to generate a

cash flow of ＄100 for 3 years plus ＄12500 in the third year. The target rate of return of

the project is 10% per annum. Calculate the net present value of the project.

Retro Company has cash of TK 100,000. its sales are Tk 600,000of which 87% is cost of goods sold and 43% is the accounts receivable. Assuming a 360 day year, the average number of days that retro takes to collect its outstanding sales is

A man expects to receive Php 125,000 in eight years. How much is that money worth now considering an interest rate of 12% compounded monthly?

A man expects to receive Php 125,000 in eight years. How much is that money worth now considering an interest rate of 12% compounded monthly?

A stock with a current price of $300, can go either up by 20%, or down by 15%. You have the opportunity to buy an American call option on this stock for $65, which matures at the end of one period, with an exercise price of 275.

a-      Please draw the trees of the stock and option values

b-      What is the price of the call option today if the risk free rate is 8%.

c-      What is your decision for this investment opportunity? Explain your answer

found two call options A and B, both options sell in the market for $4, for an underlying stock which currently sells at $15. Both options mature in one year, and the risk free rate is 6% and a variance of 4%. Upon maturity, you can exercise option A for $10, and option B for $20.

Which option you choose to buy? Explain your answer.

An investment of Ksh1,000,000 in an account accumulated to Ksh 2,500,000 after 5 years.

(i) State the accumulation factor A(0,5) . (2 marks)

(ii) (a) Find the simple annual interest rate which would give the accumulation

factor in part (i). (3 marks)

(b) Find the annual compound interest rate which would give the

accumulation factor in part (i). (3 marks)

An investment of Ksh1,000,000 in an account accumulated to Ksh 2,500,000 after 5 years.

(i) State the accumulation factor A(0,5) . (2 marks)

(ii) (a) Find the simple annual interest rate which would give the accumulation

factor in part (i). (3 marks)

(b) Find the annual compound interest rate which would give the

accumulation factor in part (i). (3 marks)

A man borrow Tk.60,000 from another man at the rate of 6 percent compound interest on condition that

he will repay the money in 8 equal installments. What will be the size of the installment?

Suppose you have savings in the bank that you want to invest in stocks and bonds instead of setting up in a new business.

Write one to two paragraphs discussing what method you can use to make the investment and explain the reasons for your decision.