Financial Engineering
shoomoosh
IEE512-412Assignment1.xlsxStudent Information
| You must enter the information in the "yellow" fields below before starting the assignment. | Fall 2020 | Question 1 | $85,757.00 | 21 | $1,800,897.00 | 0.05879 | |||||
| Name | Question 2 | 123000 | 5000 | 5 years | 49200 | 27000 | 35000 | 47000 | 35000 | 28000 | 0.05349 |
| 10 digit student ID # | 1220885757 | Question 3 | 107 | 5.5 | |||||||
| Date | 8/31/20 | ||||||||||
| Class | IEE 512 | ||||||||||
| By downloading this assignment you agree to not share this exam with anyone. You also agree to completing this assignment without the assistance or of anyone unless you have received written approval from the instructor. You agree to not collaborate with anyone with this assignment You agree to not use another student's assignment or materials to aid you with this assignment You understand that not following these rules, or any other rules identified in the ASU Academic Integrity Policy will result in a zero grade for this assignment a violation report to the Dean's office, and likely suspension from ASU. Please teach each other the Excel functions and financial engineering functions. However, do not provide answers or assist others with their answers. Engineers must learn how to solve problems! This assignment is the property of Daniel R. McCarville and Arizona State University. It is copyright protected. | |||||||||||
| Instructions: | |||||||||||
| 1. You must enter the information requested above. | |||||||||||
| 2. Include your entire 10 (ten) digit student ID number. | |||||||||||
| 3. Do not change the questions as I have typed them. | |||||||||||
| 4. Fill in all yellow boxes with the requested information and/or answer. | |||||||||||
| 5. To show your cash flow drawings, you must copy the drawings onto the Question Worksheet. | |||||||||||
| 6. Please show your Excel work in the same worksheet as the Question. | |||||||||||
| 7. Data Analysis TookPak results such as Covariance Matrices or Regression Analysis can be inserted in a new worksheet. | |||||||||||
| 8. I do give some partial credit where enough detail is presented. | |||||||||||
| Question | Maximum Points Available | Grade | |||||||||
| 1a | 3 | 0 | |||||||||
| 1b | 4 | 0 | |||||||||
| 2a | 3 | 0 | |||||||||
| 2b | 3 | 0 | |||||||||
| 2c | 3 | 0 | |||||||||
| 3a | 2 | 0 | |||||||||
| 3b | 3 | 0 | |||||||||
| 3c | 3 | 0 | |||||||||
| 3d | 6 | 0 | |||||||||
| Total | 30 | 0 | |||||||||
| Comments: | |||||||||||
Question 1
| An ASU student won a lottery as described below: | |
| Total of annual payments | $1,800,897 |
| Annual payment | $85,757 |
| Total number of annual payments | 21 |
| First annual payment is immediate | |
| Interest rate used by the lottery | 5.87900% |
| The lottery gives a choice of receiving the annual payments with the first payment being | |
| immediate, or a lump sum that is paid immediately based on the present value. | |
| a. Draw the cash flow diagram, and include the values; you can use ". . . . " for some | |
| of the repetative annual payments. | |
| Points | 3 |
| Grade | |
| b. Calculate the lump sum amount. | |
| Points | 4 |
| Grade | |
| Please show all of your work in this Excel Worksheet. | |
| Paste an image of the cashflow into this worksheet. Power point drawing is | |
| preferred, but a scanned hand drawn cashflow is OK as well. |
Question 2
| You are requesting from your senior management funds to purchase a piece of | |
| equipment to produce a new product as follows: | |
| Initial equipment costs | $123,000.00 |
| Annual maintenance costs | $5,000.00 |
| Life of the program is | 5 years |
| Expected resale value of the equipment after five years | $49,200.00 |
| Revenue at the end of the first year | $27,000.00 |
| Revenue at the end of the second year | $35,000.00 |
| Revenue at the end of the third year | $47,000.00 |
| Revenue at the end of the fourth year | $35,000.00 |
| Revenue at the end of the fifth year | $28,000.00 |
| Annual interest rate used for discounting | 5.34900% |
| You plan to sell the equipment at the end of the fifth year. You will pay for maintenance | |
| in the fifth year before selling the equipment. | |
| a. Draw the cash flow diagram, including the values. | |
| Points | 3 |
| Grade | |
| b. What is the Present Value? | |
| Points | 3 |
| Grade | |
| c. What is the IRR? | |
| Points | 3 |
| Grade | |
| Please show all of your work in this Excel Worksheet. | |
| Paste an image of the cashflow into this worksheet. Power point drawing is | |
| preferred, but a scanned hand drawn cashflow is OK as well. |
Question 3
| From the corporate bond information shown below: | |
| Price: | 107 |
| Coupon (%): | 5.5 |
| Maturity Date: | 20-Jan-19 |
| Yield to Maturity (%): | |
| Current Yield (%): | |
| Fitch Ratings: | AAA |
| Coupon Payment Frequency: | Semi-Annual |
| First Coupon Date: | 20-Jul-09 |
| Type: | Corporate |
| Callable: | No |
| OFFERING INFORMATION | |
| Quantity Available: | 150 |
| Minimum Trade Qty: | 50 |
| Dated Date: | 20-Jan-09 |
| Settlement Date: | 15-Feb-12 |
| a. What is the current yield? | |
| Points | 2 |
| Grade | |
| b. Calculate the "dirty price" for a single bond by adding the accrued interest to the "clean price". | |
| Points | 3 |
| Grade | |
| c. Draw the cash flow diagram for a single bond (you can use ". . . . ." for the repetative coupons. | |
| Points | 3 |
| Grade | |
| d. Assuming 182 days in a six month period, 365 days per year, estimate | |
| the YTM using the iterative method. | |
| Points | 6 |
| Grade | |
| Please show all of your work in this Excel Worksheet. | |
| Paste an image of the cashflow into this worksheet. Power point drawing is | |
| preferred, but a scanned hand drawn cashflow is OK as well. |
