Finance 380: Financial Modelling
jaymudda
f380.f19.hwk3.xlsxSheet1
Saturday's Powerball offers you two choices when you win. The first is a lump sum of $132.7 Million. The second is an annuity offering you $225 M/30 = $7.5 M per year for 30 years with the first payment today. If your personal cost of capital is 3.5%, which option do you choose?
Suppose you borrowed $300,000 from the bank on a balloon loan, requiring 10 years of equal payments plus a balloon payment of $150,000 at maturity. If the interest rate on the loan is 4.5%, what is your payment? What would the payment be if you received a 10 year loan with NO balloon payment?
Suppose you borrowed $2,000,000 from the bank on a loan requiring annual payments. You pay $100,000 after 1 year, then $200,000 after two, $300,000 after 3 and so on until the loan is paid (Your payment increases by $100 K per year. If the interest rate on the loan is 7.5%, how long will it take you to pay off the loan?
Sheet2
| Year | CFAT | |
| 1 | $ 1,000.00 | |
| 2 | $ 1,000.00 | |
| 3 | $ 1,000.00 | |
| 4 | $ 3,000.00 | |
| 5 | $ 3,000.00 | |
| 6 | $ 3,000.00 | |
| 7 | $ 5,000.00 | |
| 8 | $ 10,000.00 | |
| Year | CFAT | |
| 1 | $ 1,000.00 | |
| 2 | $ 1,000.00 | |
| 3 | $ 1,000.00 | |
| 4 | $ 3,000.00 | |
| 5 | $ 3,000.00 | |
| 6 | $ 3,000.00 | |
| 7 | $ 5,000.00 | |
| 8 | $ 10,000.00 |
How much would you pay for the following sequence of cash flows if you wanted to earn a rate of return of 7%?
Suppose the sequence of cash flows below cost you $16,000. What rate of return would you earn on your investment?
Sheet3
Suppose you deposit $10,000 per year for 10 years in an account paying 6% interest, then withdraw $10,000 per year for five years. What is the balance in the account ONE YEAR AFTER your last withdrawal?
Sheet4
Suppose you deposited $10,000 per year in an account paying 8% per year and did so for 30 years. You then withdraw the funds in fifteen equal installments, one year apart, starting one year after your last deposit. How much can you withdraw per year?
Sheet5
Suppose you deposited $10,000 per year in an account paying 8% per year and did so for 30 years. You then withdraw the funds in fifteen equal installments, one year apart, starting one year after your last deposit. How much can you withdraw per year if you want to leave $250,000 in rhe account one period after your last withdrawal?
Sheet6
Congratulations, it's your 21st birthday, AND you just hit Powerball. You've decided to set a sum of money to enable you to retire at age 50, when you'll withdraw your first $500,000 check. You'll continue to withdraw money each year untio age 85, when you'll croak. To account for inflation, you want each withdrawal to be 3% higher han he last. You wantto leave $10 million to your heirs 1 year after you shed this mortal coil. If you can earn 4% on investment, how much would you need to deposit today to meet your objectives?
