Chapter 3 Homework
Spring 2014
Chapter 3, Section 3.2 and 3.3
1. An annuity immediate pays 100 each year for 15 years. Calculate the present value of this
annuity at an annual effective interest rate of 6%.
Solution:
an =
1 - vn
i
1 15
1
1.06
100
97
Chapter 3, Section 2
1. (S13HW) Calculate the present value for an annuity that pays 500 at the end of each year for 20
years. You are given that the annual interest rate is 7%.
Solution:
1 1.07 20
1 v n
PV Qan Q
5297.01
500
0.07
i
Using your calcul
Math 373
Fall 2015
Homework Solutions Chapter 1
Non-Interest Theory
1. 2000 + 2003 + + 3500 =
Sum of an arithmetic series= (First Term) + (Last Term) (# of Terms)
2
2000 3500
*(501) 1,377, 750
2
*How do we know there are 501 terms? We know it takes 500 te
Math 373
Fall 2013
Homework Chapter 3
Chapter 3, Section 2
1. (S13HW) Calculate the present value for an annuity that pays 500 at the end of each year for 20
years. You are given that the annual interest rate is 7%.
2. (S13HW) Calculate the present value
MATH 373
Quiz 6
Spring 2013
April 11, 2013
1. Qistina buys the 100 shares of stock of Sims Corporation. Qistinas broker charges a
commission of 0.30 per share.
Jong sells 100 shares of Sims Corporation at the same time that Qistina is buying. Jongs
broker
MATH 373
Quiz 6
Spring 2013
April 11, 2013
1. Qistina buys the 100 shares of stock of Sims Corporation. Qistinas broker charges a
commission of 0.30 per share.
Jong sells 100 shares of Sims Corporation at the same time that Qistina is buying. Jongs
broker
There are 3 versions of the test. Find your version.
Math 373
Spring 2014
Quiz 2
February 11, 2014
1. Weili borrows 10,000 from Cameron. Weili will repay the loan with three payments of 4500
each. These payment will be made at the end of 2 years, at the e
Math 373
Fall 2013
Homework Chapter 2
Chapter 2, Section 2
1. Brandon borrows 2000 at an interest rate of 7.2% compounded monthly. Brandon repays the
loan at the end of 6 years.
Determine the amount that Brandon repays.
Solution:
2000(1 +
.072 12i6
) = 30
Math 373
Quiz 7
Spring 2013
April 18, 2013
1. You sell a one year European-style put option with a strike price of 48 on the stock of Yan
Company. The premium for the put is 4.70. The current spot price of the stock is 42. The
annual effective risk free i
Math 373
Quiz 7
Spring 2013
April 18, 2013
1. You sell a one year European-style put option with a strike price of 48 on the stock of Yan
Company. The premium for the put is 4.70. The current spot price of the stock is 42. The
annual effective risk free i
Math 373
Spring 2013
Quiz 2
January 31, 2013
1. Joe borrows 1000 from Yue. Joe repays the loan with a payment of P at the end of 2 years and
a payment of P 100 at the end of 4 years.
The annual effective interest rate on the loan is 7%.
Calculate P .
2. M
Math 373
Spring 2013
Quiz 2
January 31, 2013
1. Joe borrows 1000 from Yue. Joe repays the loan with a payment of P at the end of 2 years and
a payment of P 100 at the end of 4 years.
The annual effective interest rate on the loan is 7%.
Calculate P .
-100
Math 373
Fall 2013
Quiz 1
January 22, 2013
1. AnnDrea invests 10,000 in an account for 10 years. During those 10 years, she earns the
following returns:
i. A monthly effective interest rate of 1% during years 1 and 2;
ii. A nominal rate of interest of 6%
Math 373
Quiz 5
Spring 2012
April 10, 2012
1. The bid price of JAB International Stock is 50.
Jacquelyn sells 1000 shares of JAB International. She pays a commission of 1%.
Brad buys 1000 shares of JAB International. He pays a commission of 200.
The total
There are three versions of this quiz. Find your version!
September 16, 2015
Copyright Jeffrey Beckley 2015
Math 373
Quiz 1
Fall 2015
September 9, 2015
1. You are given that:
a.
v(t )
b. 10
1
t2
9
55
Calculate .
v(t )
1
a (t ) t 2
a (t )
(t )
a ' (
Math 373
Fall 2015
Homework Chapter 2
Chapter 2, Section 2
1. Kanupriya deposits 1000 in a bank today. At the end of 4 years, she has 1250 in her account.
Determine the annual effective interest rate earned by Kanupriya over this four year period.
Solutio
Math 373
Fall 2015
Homework Chapter 2
Chapter 2, Section 2
1. Kanupriya deposits 1000 in a bank today. At the end of 4 years, she has 1250 in her account.
Determine the annual effective interest rate earned by Kanupriya over this four year period.
2. Boyl
Math 373
Spring 2013
Quiz 1
January 22, 2013
1. AnnDrea invests 10,000 in an account for 10 years. During those 10 years, she earns the
following returns:
i. A monthly effective interest rate of 1% during years 1 and 2;
ii. A nominal rate of interest of 6
Math 373
Quiz 5
Spring 2013
March 26, 2013
1. You are given the following yield curve for spot interest rates:
t
0.5
1.0
1.5
2.0
2.5
3.0
rt
1.25%
2.25%
3.00%
3.50%
3.75%
3.90%
Calculate the price of a two year bond with a par value of 1000 and a maturity
Math 373
Quiz 5
Spring 2013
March 26, 2013
1. You are given the following yield curve for spot interest rates:
t
0.5
1.0
1.5
2.0
2.5
3.0
rt
1.25%
2.25%
3.00%
3.50%
3.75%
3.90%
Calculate the price of a two year bond with a par value of 1000 and a maturity
MATH 373
Quiz 3
Spring 2013
February 26, 2013
1. Emma invests 10,000 into Fund A at the end of each year for 13 years. Fund A earns an
annual effective interest rate of 6%.
At the end of each year, the interest from Fund A is withdrawn and deposited into
MATH 373
Quiz 3
Spring 2013
February 26, 2013
1. Emma invests 10,000 into Fund A at the end of each year for 13 years. Fund A earns an
annual effective interest rate of 6%.
At the end of each year, the interest from Fund A is withdrawn and deposited into
Math 373
Spring 2012
Quiz 5
March 27, 2012
1. The common stock of Wang Corporation will pay a quarterly dividend of 8 in 3 months. The
corporate dividends are expected to increase by 1 each quarter. In other words, a dividend of 9
will be paid in 6 months
Math 373
Fall 2012
Quiz 4
October 30, 2012
1. Li purchased a 10 year callable bond with a par value of 10,000. The bond matures for par and
pays semi-annual coupons at a rate of 8% per year.
The bond is also callable at the end of years 6 through 9. The b
Math 373
Fall 2012
Quiz 3
October 10, 2012
1. Durban is receiving an annuity for 40 years. The annuity makes quarterly payments. The
payments during the first year are 25 paid at the end of each quarter. The payments during the
second year are 50 paid at
Interest Theory Facts 1
Words
Accumulation Function
Amount Function
Symbols
Effective Interest Rate of period from t1 to t2
i[ t1 ,t2 ]
Effective Interest Rate for the nth Period
Annual Effective Interest Rate
Nominal Annual Rate or
Nominal Interest Rate