Sydney Institute of Business and Technology
ACST101 Elements and Techniques of Finance
Tutorial 8 Solutions
A. FLAT RATE LOANS
Q1.
Find the total loan interest, the monthly instalment, and the effective
monthly and annual rates of interest for a loan of $
Sydney Institute of Business & Technology
ACST101 Elements and Techniques of Finance
Tutorial 12 Solutions
PART A: Capitalised Costs
Q1.
A perpetuity pays $100 every 4 years, and the first payment is at the end of 4 years. What
is the present value of thi
SIBT - ACST101
Lecture 3 Solutions
We are still working with the compound interest formula
S = P * (1+i) n
So far we have solved 2 types of problem:
Given P, i, and n -> find S, the accumulated value.
Given S, i, and n -> find P, the PV
Now we have 2 more
ACST201 Financial Modelling
Question 1
Take-home quiz 2
S1 2016
[6 marks]
a. [1 mark ] Find the price (per $100 face value, rounded to 3 decimal
places) of a 12% Treasury bond, 145 days before maturity, at a yield
of 6.26% p.a. 1
b. [2 marks] Suppose anot
ACST201 Financial Modelling
Question 1
Take-home quiz 1
S1 2016
[4 marks]
a. [1 mark ] What principal will accumulate to $3 000 in 60 days if the
simple interest rate is 5 1/2% p.a.?
b. [1 mark ] A 120-day commercial bill will mature for $100 000. Using
5
MACQUARIE UNIVERSITY
Faculty of Business and Economics
ACST201: FINANCIAL MODELLING
WEEK 10 TUTORIALSAMPLE SOLUTIONS
Questions to try before the tutorial
A bank makes one-year loans of $25,000 and wants to earn j1 = y% on its whole portfolio of such
loans
ACST201 Financial Modelling
Question 1
On-line quiz 2
S1 2016
[10 marks]
In the lecture notes in Week 07 (and some other weeks) weve dealt with a
bond that has a duration of 7 years. We wish to determine the purchase
yields (as j2 rates) for this bond (10
ACST201: FINANCIAL MODELLING
WEEK 04 PRACTICAL
Questions to try before the practical
1. Calculate the maturity value, and then the annualised (simple interest) yield, if
$100,000 is invested for 145 days in three stages, and earns:
12% for the first 40 da
MACQUARIE UNIVERSITY
Faculty of Business and Economics
ACST201: FINANCIAL MODELLING
WEEK 07 TUTORIALHPY & Duration
Question 1
A $100,000 120-day bank bill is purchased for a price of $98,144.66. When it has
90 days to run to maturity, the bill is sold for
S = P(1 + rt)
3,000 = P(1 + 0.055 60/365)
P = $2,973.12
P = S(1 dt)
= 100,000 (1 0.05 50365)
= $99,315.07
I = 99,000 98,600 = $400
I = Prt
400 = 98,600 r 35/365
r = 4.23% p.a.
t = 35 days
P = S(1 dt)
t = 90 35 = 55 days
99,000 = 100,000(1 d 55/365)
d = (1
MACQUARIE UNIVERSITY
Faculty of Business and Economics
ACST201: FINANCIAL MODELLING
WEEK 06 PRACTICALTRCY
Question 1
A 6% 20-year Treasury bond is bought at a yield of 8.5% (compounded half-yearly) for a price of
$76.153 (per $100 face value). If the bond
MACQUARIE UNIVERSITY
Faculty of Business and Economics
ACST201: FINANCIAL MODELLING
WEEK 12 TUTORIALForward Contracts
These spot rates (compound interest) are available in the bond market:
Term (years)
1
1
2
Spot rate (j2% pa)
4.5
4.7
4.9
5.1
Term (years)
MACQUARIE UNIVERSITY
Faculty of Business and Economics
ACST201: FINANCIAL MODELLING
WEEK 05 PRACTICALBOND PRICING
Questions to try before the practical
1. Find the price, to yield 6% net, of a 10-year 8% Treasury bond, allowing for 30% tax on
(a) interest
Q1
a. Coupon per half year=12%/2*100=6
Price=
100+6
145
1+0.0626365
= 103.428
b. For most short term financial instruments (e.g., bank bills,
promissory notes), it is true that the price should be always
less than the face value. The reason is that each o
ACST201 Financial Modelling
Question 1
On-line quiz 1
S1 2016
[10 marks]
Refer to Question 7 of the revision problems from week 04.
a. [2 marks] Use Goal seek to solve the question in a spreadsheet. Make
sure you carefully document the steps you used in t
MACQUARIE UNIVERSITY
Faculty of Business and Economics
ACST201: Financial Modelling
WEEK 07 WORKSHOP PROBLEMS
INVESTIGATING BOND HOLDING PERIOD YIELDS: BOND DURATION
Unlike our earlier workshop classes, the Week 07 workshop is not based primarily on
solvi
MACQUARIE UNIVERSITY
Faculty of Business and Economics
ACST201: Financial Modelling
WEEK 09 WORKSHOP PROBLEMS
CONTINGENT PAYMENTS
Why is there a contingent payments approach? Because not all future payments in the
world of finance (e.g., interest on bonds
MACQUARIE UNIVERSITY
Faculty of Business and Economics
ACST201: Financial Modelling
WORKSHOP PROBLEMS (Week 06)
HORIZON ANALYSIS: BONDS & BILLS
1. A 10% 5-year Treasury bond is bought at $92.640 (market yield-to-maturity is 12%).
Assuming a reinvestment r
MACQUARIE UNIVERSITY
Faculty of Business and Economics
ACST201: Financial Modelling
WEEK 10 WORKSHOP PROBLEMS
CONTINGENT PAYMENTS
11. Ms Simpson is approached by a financial services company selling a university
scholarship plan. Under the plan, if Ms Sim
ACST201 Financial Modelling
Week 04 revision material
S1 2016
Week 04 Revision Material
1. Mike deposits a single payment into a fund on 1 July 2013. Mike will
make quarterly withdrawals of $1 000 for 5 years (i.e., twenty withdrawals will be made). Inter
MACQUARIE UNIVERSITY
(Faculty of Business and Economics)
ACST201: FINANCIAL MODELLING
WEEK 12 WORKSHOP PROBLEMS
VALUING OPTIONS
An option gives the holder the right (but not the obligation) to buy, or to sell, a particular
commodity, or financial security
MACQUARIE UNIVERSITY
Faculty of Business and Economics
ACST201: Financial Modelling
WORKSHOP PROBLEMS (Week 05)
EFFECTS OF FEES AND CHARGES
1. A $100 million 14% bond is issued at par. The bond pays interest annually in arrears
and its term to maturity is
MACQUARIE UNIVERSITY
Faculty of Business and Economics
ACST201: Financial Modelling
WEEK 08 WORKSHOP PROBLEMS
USES OF BOND DURATION
The Week 8 workshop consists of five main parts:
Part 1) During the financial crises on Tuesday, 7 October 2008, the RBA an
MACQUARIE UNIVERSITY
Faculty of Business and Economics
ACST201: Financial Modelling
WORKSHOP PROBLEMS (Week 04)
BOND PRICES AND YIELDS
1. Find the price, to yield 10% net, of a 10-year 12% Treasury bond,
allowing for 30% tax on:
(a) interest only;
(b) int
MACQUARIE UNIVERSITY
Faculty of Business and Economics
ACST201: FINANCIAL MODELLING
WEEK 12 WORKSHOP PROBLEMS
VALUING OPTIONS
Problem 1a (Contingent payments approach)
XYZ Corp share price is currently $100. We expect that, over the next month, the price
MACQUARIE
University
This question paper may be retained by candidates.
FORMAL EXAMINATION PERIOD: SESSION 2, NOVEMBER 2015
EXAMINATION DETAILS:
j Unit Code:
I Unit Name:
! Duration of Exam
(including reading time if applicable)
! Totai No. of Questions:
ACST101 - Finance 1A
WEEK 2
TIME VALUE OF MONEY (TVM) PART 1 SINGLE AMOUNTS
Learning Outcome 2: Explain key fundamental concepts in finance including
determinants of the time value of money.
Learning Outcome 3: Value cash flows including single [and mult
ACST101 Tutorial Problems Topic 1 (to discuss in week 2 Tutorial)
YOU ARE EXPECTED TO ATTEMPT THESE BEFORE THE TUTE IN ORDER TO MAXIMISE THE BENEFIT
FROM CLASS DISCUSSION
1. What effect does an increase in demand for business goods and services have on th
7. Suppose you deposit $10,000 in an account that pays 14.4% interest, compounded
annually for exactly 5 years.
a) At the end of 5 years indicate the following components of the account balance:
i. Principal
10000
ii. Simple Interest
7200
iii. Interest on
6. Alice is to due to repay $10,250 to her parents in exactly 9 months time. She has asked to
defer the repayment for a further 4 months. If the interest rate is 7% p.a compounding
monthly, what amount in 13 months is equivalent to the $10,250 due in 9 mo
TUTE PROBLEMS TOPIC 2 TIME VALUE OF MONEY (TVM) PART I: SOLUTIONS
Present Value Single amount
1. Miss Y is expecting an inheritance of $1.25 million in 4 years. If she had the money today, she could
earn interest at an annual rate of 7.35%, compounding an
TUTE PROBLEMS TOPIC 3 TVM PART II: SOLUTIONS
Calculating annuity payment
1) The Bridge Bar & Grill has a 3.5 year loan of $23500 with Bankwest. It plans to repay the loan in
7 equal semi-annual instalments starting today. If the rate of interest is 8.4 pe
ACST101 Tutorial Topic 1 Solutions:
1. What effect does an increase in demand for business goods and services have on the
real interest rate? What other factors can affect the real interest rate?
An increase in the demand for business goods and services w
WEEK 5 TUTORIAL SOLUTIONS TVM (problem-solving)
Annuity Multiple rates
1. A 10-year annuity has annual payments of $4,000. The first payment is in 1 year. If interest is
6%p.a (effective annual rate) for 3 years followed by 7%p.a (effective annual rate) f