The Bugrid Holdings Ltd has announced a rights offer to raise $15 million for a new operation in Plantland. Bugrid will inspect properties for
white ants after the owner pays a non-refundable inspection fee of $3,000. The share currently sells for $2.50 a

1Module Two
Module 2: Mathematics of Finance
Self-Study Questions for Module Two
These questions have been set as self-quiz problems. Solutions can be found at the end of
this module. Students should be able to do all of these problems after having comple

Equivalent Value
0
1
0
2
230
3
50
4
65
5
100
6
200
7
300
8
400
9
25
10
100
Given the cash flows in the table above and a rate of 10%pa, what is the equivalent value of
these cash flows at t = 7
Here you are being asked to find the value of each cash flow

EFN406 Tutorial 02
Tutorial 02 Questions
Questions 1 to 4 below, plus 5. - problems from the textbook (BF) :
1. What is the value at the end of year four of $100 received today, if the rate is 10% pa
compounded semi-annually?
2. What is the present value

Important Formulas
Opportunity Cost of Missing Discount (nominal)
Opportunity Cost of Missing Discount (effective)
Price of a Bank Bill (and specifically a 90 day bill)
Solving for the Rate
This is just the FV equation rearranged.
Effective Annual Rate
Fu

1Module Two
Module 2: Mathematics of Finance
Learning Objectives
On completing this module students should be able to:
Understand and calculate simple interest, compound interest and effective interest rate;
Distinguish the different ways of defining inte

Key Rates AFR 3/201/2014
90day bank bill
2.72
3 year bonds
2.722
10 year bonds
3.433
This is an extract from The AFR Friday 3rd October 2014.
90-day bills
Note that the 90-day bill rate is 2.72. It does not say percentage (although % is
implied), it does

SOME INTERESTING FORMULAS
PresentValueandFVofaGrowingAnnuity
OfcourseonceyouhavethePVitiseasytofindtheFVandviceversa.
FVn=PV(1+r)nandPV=FVn(1+r)n
PVofanAnnuityDue
Equation3.21PBEHP
PVofaDeferredAnnuity
Equation3.24PBEHP
Where, k is the number of periods t

Problem 3 PBEHP
P0
P1
Return
Problem 8a
PV
t
i
FV
Interest
Problem 12
P
i
t
m
n
FV
10000
10400 Simple Interest
0.04 Compound
48.67%
61.15%
Problem 8b
Interest
1000
10
0.08
800
2158.92
1158.92
17200
0.025
2
4
8
20957
Problem 14
P
F
i
t
a
Problem 17
j
m
b
a

EFN406 Managerial Finance
Module 02
Financial Mathematics
2015
EFN406 Managerial Finance
Slide 1
Reading
Sections 3.1 and 3.2 Read and study in
full.
Section 3.3 Read and study in full, but
remember unless otherwise stated always
use the compound intere

Textbook Questions and Problems Module 02(with solutions)
PBEHP
These questions and problems are optional. They are not part of the formal assessment for the
unit. A link to the solutions is available on the unit Blackboard site. You may have covered
some

Luke borrows $8000,000 from a bank to set up a medical practice. He agrees to pay a fixed interset rate of 10.2% per annum (calculated and added monthly) and to
repay by equal monthly (end of month) installments over ten years.
(i) Calculate the monthly r

Textbook Questions and Problems Module 01
These questions and problems are optional. Use them as extra practice questions.
For the theory questions prepare your answer and then compare it with the one provided. This
will give you good practice at answerin

EFN406 Tutorial 01
Tutorial 01: Questions
1.
2.
3.
4.
5.
6.
7.
Discuss the objective used by companies in making financial decisions.
Discuss the three major financial decisions of the firm.
Outline two types of agency problems that may exist within a fir

Question 1
Question 1
Polycorp issued equity four years ago at a value of $400,000 that now has a market value of $350,000 and debt that has a book value of $400,000 and a
market value of $450,000. What is the market value of Polycorps assets?
Solution
V=

1Module One
11Equation Section 1Module 01: Introduction to
Finance
Some of these questions cover very simple calculations that are covered in Module
02. It helps to read ahead.
Self-Study Questions for Module One
1. Polycorp issued equity four years ago a

Module One Formulas
Value Equation
Period Return
Future Value
Present Value
Net Present value
Effective Annual Rate
Where:
NPV = net present value
V = value of the firm
D = value of debt
E = value of equity
r = required return
C0 = cash flow or value at t

1Module One
11Equation Section 1Module 1: Introduction to
Finance
Learning Objectives
On completing this module you should be able to:
Define finance, financial management, and the role of the finance manager;
Understand the finance way of thinking;
Expla

MathPointers
3/7/15
Slidesshowingthebasic
mathandconventions
neededforfinanceusing
financeexamples
DoItYourself 1
Maths Pointers
RefresherinMathematicsfor
Finance
A quick review of basic algebra
As we go through we look at applications to finance
The best

Introduction to
Mathematics
for Business Students
produced by the
School of Economics and Finance
Faculty of Business
Queensland University of Technology
Dear students of QUT,
Welcome to your studies at the Faculty of Business. We hope that you will find

Walk the Dragline
0
1
2
3
4
5
Cost of Walk
Discount rate
Tax rate
?
?
?
?
?
?
?
?
?
Total Expenses
Tax
Net Cash Flows
operator salary 2015 (year 1)
etc.
etc.
etc.
Sale price of dragline 2015
etc.
etc.
$9,500,000
Table 1
Contractor hours per year
Contracto