Math 1581 Business Mathematics I
Answers to TEST 1
1. Consider a 182-day Treasury Bill, issued June 6, 2013 and maturing December
5, 2013, with the face value of $1, 000. Jane bought the T-bill on June 6, 2013.
(a)(4 marks) Find the purchase price (rounde
Math 1581 Business Mathematics I
TEST 2
Student Number:
Family Name:
Given Name:
- You have 100 minutes for this exam. There are 6 questions, worth 60 marks in
all.
- Place your photo identication out on the desk. A BASIC calculator (with nothing stored i
Math 1581 Business Mathematics I
TEST 1
Student Number:
Family Name:
Given Name:
- You have 100 minutes for this exam. There are 7 questions, worth 60 marks in
all.
- Place your photo identication out on the desk. A BASIC calculator (with nothing stored i
Math 1581 Business Mathematics I
Answers to TEST 2
1. (10 marks) Rob began saving money by making monthly deposits of $200
into a fund earning 9% interest compounded monthly. The rst deposit occurred
on August 1, 2001. Rob was temporarily unable to make d
Test Q.6
Smith makes deposits of $1, 000 on the last
day of each month in an account earning interest at rate j12 = 12%. The rst deposit is
January 31, 2005 and the nal deposit is December 31, 2029. The accumulated account is
used to make monthly payments
Example 1
Smith wants to accumulate $1, 000 by means
of semiannual deposits earning interest at nominal annual rate j2 = 8%, with interest credited
semiannually. The regular deposit will be $50
each. Find the number of regular deposits required, and the a
Test Q.5
A scholarship fund is started on January 1,
2000 with an initial deposit of $100, 000 in an
account earning j2 = 8%, with interest credited every June 30 and December 31. Starting January 1, 2002, the fund receive a deposit of $5, 000 every 6 mon
Example 1 (Exercise B.8 in Sec 4.1)
A father saved money in a fund to pay his
sons 4-year university program for 2009-2012.
The fund will pay $300 at the beginning of
each month for 8 months (September through
April) plus an extra $2, 000 each Septermber
Summary of Identities
1.
sn i = (1+i) sn 1 i + 1
2.
s2n i = (1+i)n sn i + sn
3.
s3n i = (1+i)n s2n i + sn
4.
(i) sn p i = (1+i)n s p i + sn i
(ii) sn p i = (1+i)p sn i + s p i
5.
an i = (1+i)1 sn 1 i + (1+i)1
6.
(i) an p i = (1+i)n a p i + an i
(ii) an p
SECTION 4 DEPRECIATION
A. Terminology
Def. 4.1: Assets having a finite lifetime are taken to be consumed
gradually over a period of time. This process of consumption is
called depreciation.
a. A periodic charge to measure the declining value of the asset.
SECTION 3 BONDS
A. Terminology
Def. 3.1: A bond is a certificate of indebtedness (a written contract
of indebtedness). The borrower is called the issuer of the bond and
the purchaser of the bond is called the bondholder. The issuer is
said to have issued
H. Discounted Value or Present Value
Example 1.8: Suppose that a certificate of deposit is sold at a
discount (that is for some number less than $10,000 and that its
value at maturity is $10,000). What should BGE pay for the
certificate in order that the
SECTION II SIMPLE ANNUITIES
(This is the beginning of chapter 3 in Z-B.)
Def. 2.1: An annuity is a sequence of payments made at different
times. Usually the intervals between successive payments are equal
(but not always)
Example 2.1: An investor pays BGE
Example 1 (Exercise B.12 in Sec 3.2)
You want to accumulate $100, 000 at the end
of 20 years. You deposit $1, 000 at the end of
each year for the rst 10 years and $(1, 000+x)
at the end of each year for the second 10 years.
Interest rate is j1 = 3.25%.
(a
Example 1
Jenn is going to buy a house and receive a
$150, 000 mortgage. She has her choice of the
following two mortgages, both with monthly
payments over 25 years.
(i) j2 = 10% interest rate, and if she pays o
early within 5 years, there is a penalty eq
Example 1
Smith borrows $20, 000 to purchase a car. The
car dealer nances the purchase and oers him
two alternative nancing plans, both of which
require monthly payments at the end of each
month for 4 years, starting at the end of the
month in which the c
Example 1 (Exercise A.16 in Sec 5.1)
A loan is amortized with level payments. Fill
in the next two lines of this schedule if part of
amortization schedule shows
Payment
Interest
Principal
440.31
438.71
Outstanding
Balance
160.07
161.67
1
Example 2
A 5-yea
Example 1
Tom receives an invoice for $20, 000 with terms
2/20, n/60. If he borrows $19, 600 on day 20
and repay it on day 60, what is the highest
interest rate he is willing to pay?
1
Example 2
Smith borrows $2, 000 from Brown and writes
a promissory not
Example 1 (Exercise 6 in Sec 1.5)
A company borrowed $50, 000 on May 1, 2013
and wrote a promissory note with simple interest rate at 11% for 3 months (due Aug 1,
2013). On the maturity date, the company
paid the interest in full and gave a second note
fo
Example 1 (Exercise B.12 in Sec 3.2)
You want to accumulate $100, 000 at the end
of 20 years. You deposit $1, 000 at the end of
each year for the rst 10 years and $(1, 000+x)
at the end of each year for the second 10 years.
Interest rate is j1 = 3.25%.
(a
Example 1 (Exercise B.8 in Sec 2.5)
The payments of $500 now and $800 in 3 years
are scheduled at j1 = 8%. In how many years
should a single payment of $2, 000 be made in
order to be equivalent?
How many years and days if simple interest is
assumed for a
Math 1581 Business Mathematics I
Answers to Midterm test
1. (8 marks) A company borrowed $25, 000 on Apr 1, 2012 and wrote a promissory note with simple interest rate at 9% for 3 months (due July 1, 2012). On the
maturity date, the company paid the intere
Example 1 (Exercise B.8 in Sec 2.5)
The payments of $500 now and $800 in 3 years
are scheduled at j1 = 8%. In how many years
should a single payment of $2, 000 be made in
order to be equivalent?
How many years and days if simple interest is
assumed for a
Math 1581 Assignment #4
All page numbers and problems refer to your textbook Zima-Knopp-Brown. If a problem in the text has
more than one part, hand in only the parts which I ask for. If no parts are stated, then hand in ALL parts.
(Example: 3. (a) p. 32
Information on TEST 1 for MATH 1581
The first test will be on Thursday, October 13, 7:00-8:00pm.
You must bring your photo identification and your calculator to write the test.
The first test covers C
Math 1581 Assignment #1
All page numbers and problems refer to your textbook Zima-Knopp-Brown. If a problem in the text has
more than one part, hand in only the parts which I ask for. If no parts are stated, then hand in ALL parts.
(Example: 3. (a) p. 32
Example 1
A $10, 000 bond paying semiannual coupons at
j2 = 10% was issued on June 18, 2010. The
rst coupon was paid on Dec 18, 2010, and
the bond has maturity date of June 18, 2030.
(a) Find the price of the bond on its issue date
using a nominal annual
OPERATIONAL COMMENT vs. CONTENT COMMENT
1.
All exams will be "open-book" and "open-notes" (subject to
change).
2.
YOUR exams will have multiple choice questions (POSSIBLY 50%
or more, BUT maybe less) . Partial credit MAY be given for a
"second-best" answe