Mathematics of finances

COURSE CODE BCO126 COURSE NAME MATHEMATICS OF FINANCE Task brief & rubrics

Final Amed Assignment Task

This summa)ve assignment is divided in a portafolio of 3 exercises. This is an individual assignment.

You have to answer the following ques)ons:

QUESTION 1.

A new piece of machinery needs to be purchased. The following )meline shows the cash flow of a 5-year project. Based solely on this informa)on, would you recommend accep)ng or rejec)ng the project? Jus)fy your response technically.

QUESTION 2.

You have invented an intelligent device that can increase the efficiency of the produc)on chain by 10% for a building materials produc)on company. You intend to sell it in exchange for a perpetual payment that will start at $10,000 and grow at a rate of 3% each year.

What is the present value of this perpetuity, if the discount rate is 6%?

QUESTION 3.

Your Aunt Annie is asking for your advice. She will receive a 4-year annuity star)ng at $800 but increasing by 8% per year. At the end of each year, Aunt Annie likes to deposit the money earned into her bank savings account. Let's assume that her accounts earn interest at a compounded rate of 5% per year.

a) A]er 4 years, what would her account be worth?

b) Draw the )meline for the Future Value of this ordinary Annuity.

FormaliAes:

• Font: Arial 12,5 pts.

• Text alignment: Jus)fied.

Submission:

Mid-term: Week 12 – Via Moodle (Turni)n). Submission deadline Sunday 2nd May 2021.

Weight:

This assignment count as 40% of your total grade in this subject.

These summa)ve assignments evaluate the following learning outcomes:

o Outcome 1: Understand the concept of )me value of money;

o Outcome 2: Define the concept of rate of return of a project in finance;

o Outcome 3: Dis)nguish between simple and compound interest rates;

o Outcome 4: Assess the present value of future cash flows and the future value of regular savings, annually and periodically;

o Outcome 5: Demonstrate an ability to apply the technical skills related to the course in a prac)cal context;

o Outcome 6: Understand the process of investments appraisal and projects classifica)on;

o Outcome 7: Determine percentage calcula)ons and discoun)ng.

Rubrics for each quesAon

Descriptor

29-33

The student uses the proper formulas, completes the calcula)ons correctly, arrives to the right result, draws the graph correctly when required

26 - 28.9

The student uses the right formula, but applies it wrongly (minor errors, figures in the wrong place…) and then, of course, the result is wrong

21 - 23.9

The student demonstrates a fair understanding of the meaning of the data given and of the ques)on asked, but he/she is not able to iden)fy the formula to be used, does larger errors and/or the calcula)ons are wrong.

18- 20,8

The student demonstrates some understanding of the concepts but he/ she is not able to relate the data given in any way

9- 17,9

The student demonstrates insufficient understanding of the concepts and does not men)on any relevant ideas or concepts, but he/she done not leave it blank

3- 8,9 The student leaves the ques)on blank or cheats.