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?
This is a growing annuity:
PV = $11,000/(0.0575 - 0.015) x [1
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?
= 6.5%/2 = 3.25%
EAR = (1+.0325)
-1 = 6.605625%
Monthly rate is r = (1+0.06605625)
- 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
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,
3. (Q. 6 in B) Research In Motion recently issued a five-year, zero-coupon bond