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HW2-Part2-GroupValerieJoaquinAzorMiguel-Sec02

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Universidad Iberoamericana UNIBE Financial Mathematics Professor Osvaldo Lagares Homework 2-Part 2 Valerie Bodden Kluge (10-0014) Azor Hazoury (10-1192) Joaquin Castillo (10-0084) Miguel Iglesias (10-0085) February 12, 2011 Santo Domingo, Dominican Republic Page 1 of 10

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SILABO – GERENCIA EMPRESARIAL Universidad Iberoamericana UNIBE Due Date : February 12 2011 Deliver hard copy at the beginning of class. Note: In all the problems set, even though those who involve multiple choices questions, the student must provide a clear mathematical argument for the response. Otherwise a partial credit will be given for correct answers. Chapter 2 Exercise 2.1: 8, 22, 30. Exercise 2.2: 6, 8, 14, 16, 24, 30. Exercise 2.3: 6, 8, 18, 20, 28, 30, 32, 34. End of Chapter 2 exercises: 28, 34. 2.1 Simple Discount Page 2 of 10 FINANCIAL MATHEMATICS HOMEWORK 2: PART 1
8. To finance the building of a new fire station, the Farmview Fire District issued discount notes, each having a face value of \$1,000 and a term of 5 years. The notes were sold at a simple discount rate of 3%. Find the proceeds of each note sold. D = (m)(d)(t) D = (\$1,000)(0.03)(5) D = \$150 \$1,000 - \$150 = \$850 22. On June 28, 2005, I decided to invest some money by buying a \$1,000 face value discount note, with a maturity date of December 31, 2005 and a simple discount rate of 5.89%. How much of a discount will I get off the note’s face value? June 28=151+28 = 179; December 31=365. Term= 365 – 179 = 186. D = (m)(d)(t) D = (\$1,000)(0.0589)(186/365) D = \$30.01 30. Life insurance policies pay their death benefit on the death of the person insured. A viatical settlement is a business agreement in which someone with a terminal illness may “sell’ his or her insurance death benefit to an investor at a discount. The investor becomes the beneficiary of the insurance policy, and receives the death benefit when the insured person passes away.The amount of the discount is \$150,000 - \$117,300 = \$32,700 Suppose that Ellwood has a \$150,000 life insurance policy, and has been diagnosed with a terminal illness. His doctors have told him that he can expect to live only another 9 months. A

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