GRY must lie between 4.4% and 4.5%. Interpolating we get: 114.73
115.11 4.4 0.1 4.5% 114.61 115.11 [1] Page 16 CT1:
Q&A Bank Part 4 Solutions IFE: 2013 Examinations The Actuarial
Education Company Solution 4.18 This question is taken from Subject
102, Apr
deviation of the accumulation at the end of 12 years. [5] [Total 7] Page
6 CT1: Q&A Bank Part 4 Questions IFE: 2013 Examinations The
Actuarial Education Company Question 4.17 You are given the
following information about the term structure of interest rat
not: Please tick here if you are allowed extra time or other special
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probability 0.5 9% with probability 0.2 i = What is the
expected accumulated amount by the end of the fifth year of an initial
investment of 20,000? [3] Question 4.8 Calculate, using an interest
rate of 10%, the discounted mean term of a 20-year annuity c
978-0273711414 Principles of corporate finance (Global edition).
Brealey, R. A.; Myers, S. C.; Allen, F. 10th ed. McGraw-Hill, 2010. ISBN:
978-0071314176 Calculators Please refer to the professions website
for the latest advice on which calculators are pe
Discuss the effect that the dividend policy will have on the market
valuation of a company. (vii) Define what is meant by a companys
cost of capital and discuss how its cost of capital interacts with the
nature of the investment projects it undertakes. (C
and is independent of the yields in all previous years. Let t i be the
rate of interest earned in the t th year (i) Derive formulae for the
mean and variance of the accumulated value after n years of a single
investment of 1 at time 0. [6] (ii) Each year
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the linked rate of return for the whole year. [2] Question X2.2 A loan
of 2,000 is subject to an APR of 16.8%. The loan is to be repaid over 6
months in monthly instalments (payable at the end of each month).
Calculate the flat rate of interest. [3] Quest
Question 5.4 The 1, 2, and 3-year spot rates are 3.5%, 4% and 3.7%
respectively. The 2-year forward rate from time 3 is 5% and the 1-year
forward rate from time 4 is 4.9%. Calculate: (i) the 3-year forward rate
from time 1 [2] (ii) the present value at ti
decided to sell and has found a potential buyer, who is subject to
income tax at 25% and capital gains tax at 35%, and who is prepared
to buy the stock provided that he obtains a net yield of at least 10%
pa. (ii) Calculate the best price (per 100 nominal
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in 5 years time. [4] [Total 9] Question 4.18 An individual purchases
100,000 nominal of a bond on 1 January 2003 which is redeemable at
105% in four years time and pays coupons of 4% per annum at the end
of each year. The investment manager wishes to inve
Examinations The Actuarial Education Company Solution 5.7 The
accumulated value of the payment stream is: 10 10 0 (10 2 )exp 0.05
0.01 t t s ds dt + + [2] This can be evaluated as follows:
10 10 0 (10 2 )exp 0.05 0.01 t t s ds dt + + [1] 10 10 2 0
10 2 0
effective rate of interest of 7% per annum. The investor has decided to
invest an amount in Bond X sufficient to provide a capital sum of
25,000 when Bond X is redeemed in ten years time. The remainder
of the cash is invested in Bond Y . In order to immun
staple more than one assignment together. The Actuarial Education
Company IFE: 2013 Examinations Subject CT1: Assignment X4 2013
Examinations Please complete the following information: Name:
Address: ActEd Student Number (see Note below): Number of
follow
(iv) Calculate the par yield of the bond. [3] [Total 10] CT1: Q&A Bank
Part 4 Questions Page 9 The Actuarial Education Company IFE:
2013 Examinations Question 4.24 In any year, the rate of interest on
funds invested with a particular company has mean valu
company employs a manager to run this project. She is paid 50,000
pa payable at the end of each month whilst the company has
ownership of any of the mills. Calculate: (i) the net present value of
the project assuming an interest rate of 4% pa effective [8
underlying the choice of discount rate within project assessment
including: the assumptions and limitations in the use of the
weighted average cost of capital the allowance for leverage the
allowance for risk. 3. Discuss the methods that may be used for
i
satisfies the equation: 3 3 1 1.1 1.09 1.08 1.29492 s So:
1/3 3s 1.29492 1 8.997% [1] For a 5-year zero-coupon bond, the
GRY, 5s , satisfies the equation: 5 2 5 1 1.1 1.09 1.08 1.07 1.48255
s So: 1/5 5s 1.48255 1 8.194% [1] For a 10-year zerocoupon bon
the value of n. [8] [Total 13] Page 10 CT1: Q&A Bank Part 4
Questions IFE: 2013 Examinations The Actuarial Education Company
Question 4.25 A company incurs a liability to pay 1,000(1 0.4 ) t at
the end of year t , for t equal to 5, 10, 15, 20 and 25. It
Actuarial Education Company IFE: 2013 Examinations CMP Upgrade
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ActEd material so that you can manually amend last years study
material to make it suitable for study for this year. The U
value for the 3-year spot rate is: 2 3 1 2 3 11 1 98 7 7 112 1 i (1 ) (1 ) i i
Solving this gives a 3-year spot rate of 9.15%. [2]
Solution 4.21 This question is taken from Subject 102, April 2004,
Question 5. (i) Using an interest rate of 7%, the presen
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