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://essays.homeworkacetutors.com, https://essays.homeworkacetutors.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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