Quantitative Financial Annuities, homework help

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Business Finance

Description

Answer each question 75 words or less

  • The difference between ordinary annuities and annuities due.
  • How to use Excel® to evaluate annuities.
  • How to read stock and bond prices.
  • Evaluate stock dividends, bond prices, and ROI of mutual funds

Which form of market efficiency do you believe exists in U.S. capital markets? Why?

What are some "real world" examples of annuities? Annuities due? Why would an investor prefer an annuit due versus an annuity?

2nd Part - Quantitative Techniques in Financial Valuation Problem Set

Purpose of Assignment

The purpose of this assignment is to provide students an opportunity to practice and learn the time-value of money concepts covered during Week 4. Students will understand how to evaluate future values, present values, interest rates, and time periods for financial investments.

Assignment Steps

Resources: Quantitative Techniques in Financial Valuation Problem Set Excel® Template

Save the Quantitative Techniques in Financial Valuation Problem Set Excel® Template to your computer.

Read the instructions on the first tab.

Complete the twelve exercises located in the template and record your answers in the highlighted spaces.

Format your paper consistent with APA guidelines.

Click the Assignment Files tab to submit your assignment.

Unformatted Attachment Preview

Instructions: Week 5 Individual Assignment Total Number of Questions - 12 Total Points: 6 1. You have twelve problems - on each tab of this Excel file. 2. Please show your work in the cells. Use Excel formulas instead of writing the values/answers directly in the cell. The instructor will then know where you made a mistake and provide you valuable feedback and partial credit (if appropria back and partial credit (if appropriate). Find the interest paid on a loan of $1,200 for three years at a simple interest rate of 5% per year. How much money will you pay after three years? Principal Rate Time Simple Interest (SI) Maturity Value =PRODUCT(B4:B6) =Principal + SI Find the maturity value of a loan of $1,750 for 28 months at 9.8% simple interest per year. Principal Rate Time Simple Interest (SI) Maturity Value -- Please make sure that the time periods for Time and Rate match. =PRODUCT(B3:B5) =Principal + SI Find the simple interest rate of a loan of $5,000 that is made for three years and requires $1,762.50 in interest. Principal Time SI Rate 762.50 in interest. A loan of $16,840 is borrowed at 9% simple interest and is repaid with $4,167.90 interest. What is the duration of the loan? Principal Rate SI Time How much money is borrowed if the interest rate is 9.25% simple interest and the loan is made for 3.5 years and has $904.88 interest? SI Rate Time Principal Find the ordinary and exact interest for a loan of $1000 at a 5% annual interest rate. The loan was made on March 15 and is due May 15. Loan date Loan Due Date Exact time days =B5-B4 Principal Rate Time Loan date Loan Due Date Exact time days Principal Rate Time Ordinary Simple Interest (SI) Exact Simple Interest (SI) =PRODUCT(B8:B10) =PRODUCT(G8:G10) =G5-G4 =PRODUCT(G8:G10) Find the bank discount and proceeds using ordinary interest for a loan to Michelle Anders for $7,200 at 8.25% annual simple interest from August 8 to November 8. Loan date Loan Due Date Exact time days Face Value (F) Discount Rate (D) Time Period (T) Bank Discount (B) years --> 'Convert Exact time in days to years =PRODUCT(B8:B10) OR =B8*B9*B10 Proceeds (P) =B8-B11 =B5-B4 What is the effective interest rate of a simple discount note for $8,000, at an ordinary bank discount rate of 11%, for 120 days? Face Value (F) Discount Rate (D) Time Period (T) Bank Discount (B) years --> 'Convert Exact time in days to years =PRODUCT(B4:B6) OR =B4*B5*B6 Proceeds (P) =B4 - B7 Rate =B7/PRODUCT(B9, B6) SOLVED EXAMPLE What is the effective interest rate for the first year for a loan of $20,000 for three years if the interest is compounded quarterly at a rate of 12%? Quoted Rate 12.00% quarterly No. of compounding periods per year EAR 4 For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo 12.55% =EFFECT(B5, B6) 1. Ross Land has a loan of $8,500 compounded quarterly for four years at 6%. What is the effective interest rate for the first y Quoted Rate No. of compounding periods per year EAR For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo =EFFECT(B11, B12) 2. Find the effective interest rate for the first year for a loan for four years compounded semiannually at an annual rate of 2% Quoted Rate No. of compounding periods per year EAR For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo =EFFECT(B19, B20) 3. What is the effective interest rate for the first year for a loan of $5,000 at 10% compounded daily for three years? Quoted Rate No. of compounding periods per year EAR For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo =EFFECT(B23, B24) 4. Depending on the issuer, a typical credit card agreement quotes an interest rate of 18 percent APR. Monthly payments are What is the actual interest rate you pay on such a credit card? Quoted Rate No. of compounding periods per year EAR For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo =EFFECT(B30, B31) 5. Find the effective interest rate for a loan of $3,500 at 10% interest compounded quarterly. Quoted Rate No. of compounding periods per year EAR For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo =EFFECT(B36, B37) SOLVED EXAMPLE Tim Bowling has $20,000 invested for three years at a 5.25% annual rate compounded daily. How much interest will he earn? Initial Investment (PV) Quoted Rate Compounding Frequency Number of compoundings (m) Quoted Rate divided by m = RATE Number of Years NPER (Num. of years * m) Ending Amount (FV) Compound Interest $20,000 5.25% Daily 365 0.0144% 3 1095 $23,411.35 $3,411.35 Choose one For Quarterly, type 4; for semiannually, type 2; for a Exercise Find the future value of a $15,000 money market investment at 2.8% annual interest compounded daily for three years. Initial Investment (PV) Quoted Rate Compounding Frequency Number of compoundings (m) Quoted Rate divided by m = RATE Number of Years NPER (Num. of years * m) Ending Amount (FV) Compound Interest Choose one For Quarterly, type 4; for semiannually, type 2; for a for semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365 for semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365 SOLVED EXAMPLE The Holiday Boutique would like to put away some of the holiday profits to save for a planned expansion. A total of $8,000 is needed in three years. How much money in a 5.2% three-year certificate of deposit that is compounded monthly must be invested now to have the $8,000 in three years? Future Value Needed (FV) Quoted Rate Compounding Frequency Number of compoundings (m) Quoted Rate divided by m = RATE Number of Years NPER (Num. of years * m) Amount Invested Now (PV) $8,000 5.2% Monthly 12 0.4333% 3 36 $6,846.78 Choose one For Quarterly, type 4; for semiannually, type 2; for a Exercise How much should be invested now to have $15,000 in six years if interest is 4% compounded quarterly? Future Value Needed (FV) Quoted Rate Compounding Frequency Number of compoundings (m) Quoted Rate divided by m = RATE Number of Years NPER (Num. of years * m) Amount Invested Now (PV) Choose one For Quarterly, type 4; for semiannually, type 2; for a r semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365 r semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365 Jamie Juarez needs $12,000 in 10 years for her daughter’s college education. How much must be invested today at 2% annual interest compounded semiannually to have the needed funds? Future Value Needed (FV) Quoted Rate Compounding Frequency Number of compoundings (m) Quoted Rate divided by m = RATE Number of Years NPER (Num. of years * m) Amount Invested Now (PV) Choose one For Quarterly, type 4; for semiannually, type 2; for annually, ty A loan of $8,000 for two acres of woodland is compounded quarterly at an annual rate of 6% for five years. Find the compound amount and the compound interest. Initial Investment (PV) Quoted Rate Compounding Frequency Number of compoundings (m) Quoted Rate divided by m = RATE Number of Years NPER (Num. of years * m) Ending Amount (FV) Compound Interest Choose one For Quarterly, type 4; for semiannually, type 2; for annually, ty ually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365 ually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365
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Explanation & Answer

Attached.

Instructions:
Week 5 Individual Assignment
Total Number of Questions - 12
Total Points: 6

1. You have twelve problems - on each tab of this Excel file.
2. Please show your work in the cells. Use Excel formulas instead of writing the values/answers directly in the cell.
The instructor will then know where you made a mistake and provide you valuable feedback and partial credit (if appropria

back and partial credit (if appropriate).

Find the interest paid on a loan of $1,200 for three years at a simple interest rate of 5% per year.
How much money will you pay after three years?
Principal
Rate
Time

$1,200
5%
3

Simple Interest (SI)
Maturity Value

$180 =PRODUCT(B4:B6)
$1,380 =Principal + SI

Find the maturity value of a loan of $1,750 for 28 months at 9.8% simple interest per year.
Principal
Rate
Time

$1,750
9.8%
2.33 -- Please make sure that the time periods for Time and Rate match.

Simple Interest (SI)
Maturity Value

$400 =PRODUCT(B3:B5)
$2,150 =Principal + SI

Find the simple interest rate of a loan of $5,000 that is made for three years and requires $1,762.50 in interest.
Principal
Time
SI
Rate

$5,000
3.00
$1,762.50
11.75%

762.50 in interest.

A loan of $16,840 is borrowed at 9% simple interest and is
repaid with $4,167.90 interest. What is the duration of the loan?
Principal
Rate
SI
Time

$16,840
9.00%
$4,167.90
2.75 2years and 9 months
Years

How much money is borrowed if the interest rate is 9.25% simple interest
and the loan is made for 3.5 years and has $904.88 interest?
SI
Rate
Time
Principal

$904.88
9.25%
3.50
$2,795.00

Find the ordinary and exact interest for a loan of $1000 at a 5% annual
interest r...


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