Accounting and Finance Solved Assignments and Essays

ACCOUNTING & FINANCE
Student Name
[Pick the date]

Question 1
(a) Rate of return R = 6% p.a.
Number of years = 7 years
Amount needs to pay for the investment opportunity =?
Cash flows
Present value= FV
(1+ R)N
Here,
Present value= {( 3000
1.06 )+ ( 6500
1.062 )+
( 280
1.063 )+ ( 1400
1.064 )+ ( 3000
1.065 )+ (10000
1.067 ) }
Present value=$ 70,916.3
Amount that Scotty needs to pay for the investment opportunity is $70,916.3.
(b) Monthly repayment amount =?
Cost of apartment P=$ 1.8 million
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Nominal interest rate of loan R=5 % p . a .∨0.4167 per month
Time period N ¿ 30 years∨360 months
The relevant formula is shown below.
Monthly repayment amount= P∗R∗( 1+ R )N
( 1+ R ) N−1 = ( 1800000 )∗ ( 0.004167 )∗ (1+ 0.004167 )360
( 1+ 0.004167 )360 =$ 9,662.79
(c) (i) Future value of monthly saving deposits =?
Future value of lump sum deposit =?
Ben has amount to invest = $50,000
Total monthly payment = N=(35∗12)=420
Interest rate R=7 %p.a ¿ 0.5833 per month
Monthly payment amount =$1500
These monthly payment would be as annuity payment for total period of 25 years. Further, it has
been assumed that first payment will either be started from today or at the starting period.
Let, the first payment will either be started from today
Future value of annuity= ( 1+ R )∗P∗{ ( 1+ R )N −1
R }=¿ ( 1+0.005833 )∗1500∗[ ( 1+ 0.005833 )420−1
0.005833 ]
Future value of annuity=$ 2,717,341.13
Future value of monthly saving deposits would be $ 2,717,341.13
Further,
Future value=PV ( 1+ R ) N =50,000 ( 1+ 0.005833 ) 420=$ 575,307.6
Future value ∑ deposit=$ 2,717,341.13+ $ 575,307.6=$ 3,292,648.72
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Future value of lump sum deposit would be $ 3,292,648.72 .
(ii) Annual pension that would be received by Ben after retirement =?
Future value of sum amount = $200,000
Rate of interest = 5% p.a.
Number of years = 25 years
Now,
Present value= FV
(1+ R)N = 200000
( 1+0.05 ) 25
Present value=$ 59060.55
Let x is the amount for which the annuity would be derived for 25 years.
x=$ 3,292,648.72−$ 59060.55=$ 3,233,588.17
Further,
Let y is the annuity amount that after one year of retirement.
Present value of annuity=A [ 1−(1+ R)−N
R ]
A= 3,233,588.1
[ 1−(1+0.05)−25
0.05 ] =$ 229,431
Therefore, the annuity amount after one year of retirement is $229,431.
Question 2
(a) Time line of cash flows
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