mathematics of finance

BC0126 Mathematics of Finance Task brief & rubrics Task

• This is a final assignment to be done individually. • You must answer all the questions in the proposed problems. • Submission file format: Word or excel document, with all the answers, clearly identifying all steps, results and including comments when

requested.

Submission: Week 12- 2nd May 2021

Weight: This task is a 40% of your total grade for this subject. This task assesses the following learning outcomes:

• Annuities • Perpetuities • Loan Repayment

Exercise 1

Exercise 2

Exercise 3

Your uncle is offering you a deal, • To pay you at the end of every month, 1,000 EUR, during 15 years with a growing rate of 2% and an interest

rate of 5% during the whole period. • Or paying you right now, 20,000 EUR.

Confirm which option would you choose and the reason. (20 points)

Find the monthly payment necessary to amortize the given loan. $180,000 at 4% for 22 years. How much will you end up paying for this loan?(10 points)

An investment offers $4,200 , with the first payment occurring one year from now. If the payments last forever, what is the present value for this perpetuity ? (20 points)

Exercise 4

You invested $2000 every 6 months at 3,5%, compounded semi-annually for 20 years. How much will I earn after 25 years? (20 points)

Exercise 5

Assume that the borrower acquired a 10 year , $180,000 loan from a bank. He will repay the loan with 10 equal payments of $26,825’31 at the end of each year. The bank’s required interest rate is an annual rate of 8%. Please prepare the amortization table. (30 points)

Rubrics

Descriptor 9-10 The student demonstrates an excellent understanding of the

concepts. 8-8.9 The student demonstrates a good understanding of the

concepts. 7-7.9 The student demonstrates a fair understanding of the concepts. 6-6.9 The student demonstrates some, but insufficient understanding

of the concepts. 3-5.9 The student demonstrates insufficient understanding of the

concepts. They may mention some relevant ideas or concepts, although it is clear that the relationship between them is not understood by the student.

1-2.9 The student demonstrates insufficient understanding of the concepts and does not mention any relevant ideas or concepts.

0 The student leaves the question blank or cheats. 95% of the grade based on the approach, calculations and comments, and 5% based on the presentation and look & field of the spreadsheet. Points are at the end of each question