Chapter 2, Section 2
1.
Question 1 in the Book
2.
Question 2 in the Book
3.
Question 3 in the Book
4.
Question 4 in the Book
5.
Melvin invests 1000 in a bank account earning a constant annual effective interest
rate. Using the Rule of 72, Melvin estimates
Math 373
Spring 2013
Homework Chapter 2
Chapter 2, Section 2
1. Bond invests 1000 at an annual effective rate of 6.4%. After T years, Bond as 2500.
Determine T .
2. Lindsay loans Jennifer 300 to buy a new iPhone. Jennifer repays the loan after 18 months.
Chapter 7
1. The preferred stock of Koenig Industries pays a quarterly dividend of 8. The next dividend will
be paid in 3 months.
Using the dividend discount method and an annual effective yield rate of 12%, calculate the
price of Koenig preferred stock .
Chapter 6 Homework
Math 373
Spring 2015
1. Changyue purchases a zero coupon bond for 600. The bond will mature in 8 years for 1000.
Calculate the annual effective yield rate earned by Changyue.
2. Haoyu purchased a 10,000 par value 20 year bond. The bond
Chapter 1
Derivative Markets
1. (S09TF) List the four uses of Derivatives.
Solution:
a.
b.
c.
d.
2.
Risk management
Speculation
Reduced transaction costs
Regulatory arbitrage
(S10TF) List the three perspectives on derivatives.
Solution:
a. End-user
b. Mar
1. Calculate the present value of an annuity immediate that pays 1000 at the end of each year for
20 years. The interest rate is an annual effective interest rate of 8%.
Solution:
1000a20 1000
1 (1.08) 20
9818.15
0.08
Or
N 20; I / Y 8; PMT 1000; CPT PV 9
Chapter 8
Use the following spot yield curve for Problems 1-5
Time
1
1
2
2
3
3
4
Spot Rate
1.0%
1.5%
2.0%
2.5%
3.0%
4.0%
5.0%
6.0%
1. Calculate the price of a 2 year bond with a par value of 10,000. The bond matures for par and
has a coupon rate of 6% con
1. Yishen wants to buy 100 ounces of gold at the end of one year. She also wants to
buy 250 ounces of gold at the end of two years. Finally, she wants to buy 400
ounces of gold at the end of three years.
You are given the following spot interest rates and
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 end of 4 years, and at the end of
6 years.
Cameron can
1. Yishen wants to buy 100 ounces of gold at the end of one year. She also wants to
buy 250 ounces of gold at the end of two years. Finally, she wants to buy 400
ounces of gold at the end of three years.
You are given the following spot interest rates and
Math 373
Spring 2014
Quiz 7
April 24, 2014
1. The current spot price of Han LTD is 147. Han does not pay dividends.
The premium for a 4 month European style call with a strike price of 147 is 10.50. Remember
that you can get the put premium if you need it
Math 373
Quiz 6
Spring 2014
April 17, 2014
1. Zijing is buying 100 shares of Sun Corporation. Zijing will pay commissions of 0.50 per share.
At the same time, Atiporn is selling 100 shares of Sun Corporation. Atiporn will pay a
commission equal to 0.25% o
Math 373
Quiz 5
Spring 2014
March 27, 2014
1. The stock for Riley Corporation pays quarterly dividends. The next dividend will be paid in 2
months and will be 3. Future dividends are expected to remain level.
Using the dividend discount method, calculate
Financial Mathematics
Math 373
Math 373 Instructor
MSEE B012 (Tu & Th at 9:00) and
EE 170 (Wed at 9:30)
Jeff Beckley
http:/www.math.purdue.edu/~jbeckley/
Math 818
317-698-8543
[email protected]
Office Hours
Monday 5:00 to 6:30 (Mackenzie)
Wednesday
Math 373
Spring 2014
Quiz 3
February 27, 2014
1. Xinglong is receiving an annuity for the next 5 years. The annuity makes payments at the
beginning of each month. The first payment is 1000. The second payment is 1000(1.05). The
third payment is 1000(1.05)
Derivative Markets
Chapter 2 Homework
Use the following information to complete the problems 1-15.
The current spot price of the stock of Combs Corporation is 87.00.
The current annual effective risk free interest rate is 6.09%.
For forward price for a 6
Math 373
Derivative Markets
Chapter 5 Homework
1. The stock of Parks Corporation has a current spot price of 100. Parks stock pays a quarterly
dividend of 3.50. The next dividend is payable in 2 months.
The continuously compounded risk free interest rate
Chapter 2, Section 2
1. JT invests 3000 in an account earning interest at an annual effective rate of 6%. How much will
JT have at the end of three and one half years?
Amount 3000(1.06)3.5 3678.68
2. Elsa invests 3000 in an account earning a nominal inter
Math 373
Spring 2014
Homework Chapter 4
Chapter 4 Section 5
1. A 30 year annuity immediate pays 50 each quarter of the first year. It pays 100 each quarter of the
second year. The payments continue to increase annually so that the payments in each quarter
1. Calculate the present value of an annuity immediate that pays 1000 at the end of each year for
20 years. The interest rate is an annual effective interest rate of 8%.
2. Using a nominal rate of 6% compounded monthly, calculate the present value of an a
Chapter 6 Homework
Math 373
Spring 2016
Chapter 6, Section 2
1. Anirudha purchases a zero coupon bond for 500. (A zero coupon bond does not pay coupons
and only has a maturity value.) The bond will mature in 12 years for 1000. Calculate the annual
effecti
Chapter 2, Section 2
1. JT invests 3000 in an account earning interest at an annual effective rate of 6%. How much will
JT have at the end of three and one half years?
2. Elsa invests 3000 in an account earning a nominal interest rate of 6% compounded mon
Chapter 6 Homework
Math 373
Spring 2016
Chapter 6, Section 2
1. Anirudha purchases a zero coupon bond for 500. (A zero coupon bond does not pay coupons
and only has a maturity value.) The bond will mature in 12 years for 1000. Calculate the annual
effecti
Math 373
Chapter 5 Homework
Spring 2016
Chapter 5, Section 2
1. Xin has a loan for 100,000 which is being repaid with level annual payments for 5 years. The
annual effective interest rate on the loan is 8%.
Create an amortization table for this loan.
Solu
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
) = 307