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MATH1091 - Assignment - 4 (1) (2) Solved

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44 views10 pages

MATH1091 - Assignment - 4 (1) (2) Solved

Uploaded by

nandinis0603
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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MATH 1091: Business Mathematics 1

Student’s Name: Calculator make and model:

Assignment 4 Total marks: 100

1. If money is worth 13.5%, compounded semi-annually, what will have


accumulated from end-of-monthly deposits of $1600 after 15 years?
(6 marks)

R=1600 i=0.135/2 t=15 m=2 p=12 f= 0.010946


c=2/12

General annuity ordinary

FVg= $891,115.69

2. Determine the amount that you originally borrowed, if you have been
making student loan payments of $525 at the beginning of every third
month for 7 years, and if you are being charged 13%, compounded
semi-annually. (6 marks)

R= 525

3. If I want to save $50,000 for a house down payment in 8 years’ time,


how much must I deposit at the end of every month if interest is paid
quarterly at 13%? (6 marks)

FV= 50000 T=8 i= 0.13/4 m= 4 p=12 c= 4/12

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2 Assignment 4

F= 0.010718 General annuity ordinary

Regular PMT= $300.60

4. A business valued at $1,500,000 is bought for $175,000 down with


payments of $50,000 at the end of every 3 months. How long will
payments have to be made if money is worth 13.5%, compounded
monthly? (8 marks)

PV= 1.325.000 R= 50000 p=4 i=0.135/12 m=12


c=12/4

F= 0.034131 General ordinary annuity

n= 69.97 quarters

5. What is the size of the annual scholarships that can be paid out of a
$500,000 fund invested at 14.25%, compounded semi-annually? (5
marks)

Perpetuity= 500000 i= 0.1425/2 c= 2/1 f= 0.147577 p=1


m=2 General annuity

500000 * 0.147577

A∞= 73,788.28

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MATH 1091: Business Mathematics 3

6. A couple is saving for a sail boat and is depositing $1,000 every 3


months into a bank account that pays 8%, compounded annually. Find
the amount the couple will have saved at the end of 5 years. (5
marks)

R = 1000 p=4 i = 0.08/1 t=5 m


=1 n = 20 c = ¼ f = 0.019427 General
ordinary annuity

FVg = $24,159.11

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4 Assignment 4

7. The multi-media department has set up a fund to replace musical


instruments as they become obsolete. If $1,500 is deposited at the end
of each month in a mutual fund that pays 12.5%, compounded semi-
annually, how much will be available for the replacement after 12
years? (5 marks)

R=$ 1500 i= 0,075 t= 10 n=120 c=

FV=$124,475

8. What is the cash price for a piece of property that was purchased for
$5,000 down with monthly payments of $600 over a 20-year period if
the mortgage has an interest rate of 10%, compounded semi-
annually? (5 marks)

DP = 5000 R = 600 t = 20 i = 0.10/2


m=2 p = 12 n = 20*12 c = 2/12
f = 0.008165 PVg = $63,047.435000 +
63,047.43 Cash Price = 68,047.43

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MATH 1091: Business Mathematics 5

9. Christy and Bob bought a small cottage for $150,000. They put
$15,000 down and negotiated a mortgage with the vendor for the
balance of the purchase price. If the vendor charges 6%, compounded
semi-annually, and the mortgage is to be repaid over 20 years,
provide the requested details below. (12 marks)

a) The required monthly payment

b) The amount outstanding on the mortgage after 2 years of


payments

c) The interest paid by Christy and Bob after 2 years of payments

d) The total interest cost for the mortgage over the 20-year period

(a) R= $961.45

(b) $ 127,508.96 left on the mortgage

(c) R * two years = 23,074.80 Principal = 7491.04


(c) They will pay $15,583.76 in interest

(d) R * 240 = 230748230748 – PV1 (d) Total interest cost


will be 95,748.00

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6 Assignment 4

9. Jason purchased a $15,000 car and financed the purchase with a


personal loan from his credit union. If the interest rate is 18%,
compounded annually, how long will it take Jason to repay the loan
with monthly payments of $450? (5 marks)

PV = 15000 i = 0.18/1 m=1 p = 12


R = 450 c = 1/12 f = 0.013888 General
ordinary annuity n = 45.07 periods or 3.76 year

11. A couple purchased a house for $89,000 by way of an $83,000


mortgage and a $6,000 down payment. If there were monthly
payments of $926.91 and the interest rate was 13%, compounded
semi-annually, how long did it take the couple to repay the full
amount of the mortgage? (5 marks)
PV = 83000 p = 12 R = 926.91 i=
0.13/2 m=2 c = 2/12 f = 0.010551
General ordinary annuity
n = 275.99 periods or 22.998773 years or 23 years rounded

12. If the couple in Problem 11 had decided to make payments of


$1,100 per month instead of $926.91, how much would they have
saved? (5 marks)

R = 1100 n = 151.51 periods or 12.63 years


a) 275.99 * 926.91 = 255,817.89 b) 151.51 * 1100 = 166,661.00

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MATH 1091: Business Mathematics 7

$89,156.89

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8 Assignment 4

13. Panco Holdings has purchased a piece of property for $109,000


and agreed to make monthly payments at the beginning of each
month. If the interest rate is 12.6825%, compounded annually, what
will be the size of each monthly payment to repay the debt in 10
years? (5 marks)

PV = 109000 p = 12 i = 12.6825% m
=1 t = 10 n = 120 c = 1/12
f = 0.010000 General annuity due R = $1,548.35

14. If Panco Holdings from Problem 13 makes payments of $1,200 at


the beginning of each month, how long will it take to repay the loan?
(6 marks)

R = 1200 n = 230.75 periods or 19.23 years

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MATH 1091: Business Mathematics 9

15. Partex Ltd. is considering the purchase of new laser technology.


The equipment can be purchased for $500,000 and is expected to last
5 years. At the end of its life, the machine can be sold for scrap parts
and should generate $50,000 in revenue. Partex has also been advised
that the service contract on the new equipment will cost $2,000 per
month. If Partex decides not to undertake the service contract, there
will not be any warranty on the new equipment.

Another option is to lease the new equipment for $12,500 per month;
no other cost is incurred, as the lease includes the service contract.

If Partex can earn 8%, compounded annually, would it be better to


buy or to lease? Use present value to evaluate each option, since this
would represent today’s value of each option to Partex, and the option
with the lowest present value will represent the least cost to the
company. (8 marks)

FV = 50000 R = 2000 p = 12 i=
0.08/1 t=5 n=5 PV Purchase =
34,029.16500000 - 34,029.16 = $465,970.84

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10 Assignment 4

16. Ivan can purchase a piece of property in the crescent neighbourhood,


Price George for $450,000. There is a plant on the adjacent property
and Ivan views this new parcel as a possible site for an expanded
plant in 15 years. If the land taxes are estimated to be 5% of the
purchase price, and if Ivan can earn 11%, compounded semi-annually,
what must the minimum value of the land be in 15 years to make the
purchase worthwhile, regardless of whether or not Ivan actually uses
the site for its plant expansion? (8 marks)

PV= 450,000 tax= $22,500 i= 0.055 n= 30

FV annuity= $22,500 * 122.9923

FV annuity= $2,767,325.75

Total FV= $2,781,009.40 + $2,767,325.75

Total FV= $5,548,335.15

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