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
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
Simple interest formulae
100000 principal
0.062 rate of simple interest per annum
0.246575342 term of contract in years
1528.767123 total interest paid at maturity
101528.7671 future value (total payment) paid at
maturity
1000000 Face value (future value)
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
ACST101 TOPIC 4 TUTORIAL PROBLEMS
1. In each of the following, assume a $100,000 loan to be repaid over 3 years by equal monthend repayments where the interest rate is 10.8% p.a. compounding monthly.
Using excel fx functions for TVM (including =PMT(), =PV
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
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 - Finance 1A
WEEK 1 THE FINANCIAL SYSTEM
Learning Outcome 1: Identify major functions, risks* and regulation* of financial
markets (* Week 9 & 11 * Week 12)
Read all Chapter 2
Lecture - Part 1 Outline
1. Finance a context
Finance- A context for f
Face Value
Yield rate p.a.
Yield rate per half year
Number of half year
Price
100
7.40%
3.70%
7
77.544
Input
Output
(a)
Face value
Price
Coupon rate p.a.
Coupon payment per half year
Number of half year
Interest rate per half year
Interest rate j2
100
94.
Using Goal Seek to solve the question
Interest rate
n value
Annuity Present value
7.25%
15
8.965824
Inputs
Outputs
To use Goal Seek.
1. We need to input a dummy interest rate, e.g., 7.25
2. Put the formula for Present value inside the annui
3. Choose Pres
Question 3
Amount due (future value)
Present value
period days
Amount of interest
Rate of simple interest per period
Rate of simple interest per annum
Amount due (future value)
Present value
Using formula
100000
98866.42
90
Using goal seek
100000
99023.33
Q1
Interest rate per year
Deposit starting time (age)
Deposit ending time (age)
Deposit amount
Focal date (age)
Time unit
Number of 2000 deposit
Size of fund
Q2
Interest rate
Deposit starting time (age)
Deposit ending time (age)
Focal date (age)
Deposit a
Using Goal Seek to find duration
Input
Output
Duration of 6 years
Yield rate (j2)
Coupon rate (j2)
Face value
Coupon per half year
Duration (half year)
Duration (year)
17.10%
8%
100
4
12.00006
6.000031
Time (half year)
Cash flow
Present value of cash flow
Question 3
Amount due (future value)
Present value
period days
Amount of interest
Rate of simple interest per period
Rate of simple interest per annum
Using formula
100000
98866.42
90
1133.58
0.011466
4.65%
Amount due (future value)
Present value
Using go
CHAPTER
1
Mathematics of Finance
1.1. INTRODUCTION
In this chapter we will discuss mathematical methods and formulae which are helpful in business
and personal finance. One of the fundamental concepts in the mathematics of finance is the time
value of mon
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:
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
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 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
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 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
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