ADMS3530-Final-F08-Sol - Name Section ID(Prof Alagurajahs...

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Page 1 Name __________________________ Section _____ ID # ____________________ (Prof. Alagurajah’s section A; Prof. King’s section G; Prof. Kohen’s section E; Prof. Li’s section D; Prof. Patterson’s section B; Prof. Tahani’s section C) AK/ADMS 3530 Final Exam Fall 2008 February 28, 2009 12 - 3 pm Exam - Solution This exam consists of 50 multiple choice questions. 2 points each for a total of 100 points. Choose the response which best answers each question. Circle your answers below, and fill in your answers on the bubble sheet . Only the bubble sheet is used to determine your exam score . BE SURE TO BLACKEN THE BUBBLES CORRESPONDING TO YOUR STUDENT NUMBER. Please note the following eight points : 1) Please use your time efficiently and start with the questions that you are most comfortable with first. Remember : every question carries the same weight, so please do NOT spend too much time on one particular question; 2) Read the exam questions carefully; 3) Choose the answers that are closest to yours, because of possible rounding; 4) Keep at least 2 decimal places in your calculations and final answers, and at least 4 decimal places for interest rates; 5) Interest rates are annual unless otherwise stated; 6) Bonds pay semi-annual coupons unless otherwise stated; 7) Bonds have a par value (or face value) of $1,000; 8) Assume cash flows or payments occur at the end of a period or year, unless otherwise stated; and 9) You may use the back of the exam paper as your scrap paper. 10) Non-programmable financial and/or scientific calculators are allowed.
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Page 2 Numerical Questions 1. (Q. 4 in B) You are planning to establish a 30-year scholarship fund for the top 3530 student at York University. The fund will pay $11,000 at the end of the first year and then increase by 1.50% per year. The manager expects that the fund will earn a 5.75% annual rate of return. How much should you donate to York today in order to maintain this scholarship? A) $50,346 B) $146,509 C) $183,214 D) $258,824 Solution This is a growing annuity: PV = $11,000/(0.0575 - 0.015) x [1 - (1.015/1.0575) 30 ] = $183,214 2. (Q. 5 in B) You want to buy a house in Collingwood that costs $300,000. You make a 20% down payment and finance the rest with a 15 year mortgage. The mortgage has a five year renewal term for which the annual mortgage rate is 6.5% compounded semi-annually. What will the remaining principal of the loan be at the end of the 5-year term? A) $162,117 B) $183,831 C) $204,514 D) $229,789 Solution i s = 6.5%/2 = 3.25% EAR = (1+.0325) 2 -1 = 6.605625% Monthly rate is r = (1+0.06605625) 1/12 - 1 = 0.005345 = 0.5345%. Number of months = 15 years x 12 = 180 = n Monthly Payment using your calculator: N=180, I/Y=0.5345%, PV=-$240,000, FV=0, COMP PMT PMT=$2,079.33 Remaining principal at the end of 5-year term is the PV of remaining payments: N=120, I/Y=0.5345%, PMT=$2,079.33, FV=0, COMP PV=$ 183,831 3. (Q. 6 in B) Research In Motion recently issued a five-year, zero-coupon bond
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ADMS3530-Final-F08-Sol - Name Section ID(Prof Alagurajahs...

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