##### Finance Questions Set, get correct solutions for your homework

Finance Questions Set

Question 1

The following payments were made into an account

for 10 years: $400 at the end of year 1 increasing by $180 p.a. Calculate the

future value at the end of the 10 years if interest is at j1 = 5.2%.

Question 2

This is an introductory question on the Week 11

lecture.

An annuity has payments increasing by 3.2% each

year. The payments are: $16,000 at the end of year 1, $16,000(1+3.2/100) at the

end of year 2, $16,000(1+3.2/100)2 at the end of year 3, and so on for 15

years. Find the present value of this 15 year annuity if interest is at 6.8%

p.a. effective.

Use the following to check that you are using the

exact value of the special interest rate j. If the first payment is 10,000 and

payments increase by 3% p.a. each year, the present value at 5% p.a. effective

of the 15 year annuity is 125295.52.)

Question 3

A sum of $470,000 is invested into a fund earning

interest at j1 = 9.8%. A payment of $47,000 will be made from the fund at the

end of year 1, with subsequent payments from the fund increasing by 4% p.a.

compound at the end of each later year. How many full payments can be made?

(Your answer should be an integer.)

(Set up an equation of value equating the value of

the payment into the fund with the value of the n say payments from the fund.)

Question 4

A sum of $460,000 is invested into a fund earning

interest at j1 = 8%. A payment of $46,000 will be made from the fund at the end

of year 1, with subsequent payments from the fund increasing by 3.8% p.a.

compound at the end of each later year. The number of full payments which can

be made is 13.

Calculate the size of the smaller final payment,

one year after the last full payment.

Question 5

A sum of $440,000 is invested into a fund earning

interest at j1 = 9.9%. A payment of $26,000 will be made from the fund at the

end of year 1, with subsequent payments from the fund increasing by 3.8% p.a.

compound at the end of each later year. How much is in the fund just after the

fifth payment from the fund?

Question 6

A loan for $83,000 is obtained at an interest rate

of j1 = 11%. The loan will be repaid by 25 annual repayments which will

increase by 3% p.a. compound, so that if the payment at the end of the first

year is $R, succeeding annual payments will be $(1+3/100)R, $(1+3/100)2R, …,

$(1+3/100)24R. Calculate R.

Question 7

A loan for $120,000 is obtained at an interest

rate of j1 = 8.2%. The loan will be repaid by 21 annual repayments which will

increase by 3.4% p.a. compound, so that if the payment at the end of the first

year is $R, succeeding annual payments will be $1.034R, $1.0342R, …,

$1.03420R. If R = 9375.30, calculate the loan outstanding at the end of year 6

using the retrospective method.

Question 8

A loan for $110,000 is obtained at an interest

rate of j1 = 9.3%. The loan will be repaid by 23 annual repayments which will

increase by 3.8% p.a. compound, so that if the payment at the end of the first

year is $R, succeeding annual payments will be $1.038R, $1.0382R, …,

https://www.essaybishop.com, https://www.essaybishop.com, essay-bay $1.03822R. If R = 8704.82, calculate the loan outstanding at the end of year 7

using the prospective method.

Question 9

On a debt of $12,000, interest is paid monthly at

j12 = 10.4% and monthly deposits are made into a sinking fund to repay the debt

at the end of 9 years. If the sinking fund earns interest at j4 = 9.4%, what is

the monthly cost of the debt?

Question 10

For the sinking fund of the previous question,

calculate the amount in the sinking fund at the end of 24 months.

Question 11

A Company wishes to establish one sinking fund to

repay $38,000 due in 6 years time, and $78,000 due in 10 years time. What is

the size of the level annual deposit for 10 years if the first deposit is made

in one years time and the fund earns 9.8% p.a. effective?

Question 12

A certain machine costs $14,000 and has an

expected lifetime of 10 years and a scrap value of $1300. The annual

maintenance cost is $1100. Find the capitalised cost of the machine if the cost

of funds is 8% p.a.

Question 13

A certain machine costs $8,000 and has an expected lifetime of 9 years and a

scrap value of $700. The annual maintenance cost is $700. Find the annual cost

of the machine if the cost of funds is 8% p.a.

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