FIN303 Financial Management Tutor-Marked Assignment July 2018

FIN303
Financial Management
Tutor-Marked Assignment
July 2018 Presentation

TABLE OF CONTENTS
Question 1..................................................................................................................................4
Part A.....................................................................................................................................4
Part B......................................................................................................................................4
Part C......................................................................................................................................4
Part D.....................................................................................................................................4
Question 2..................................................................................................................................5
Part A.....................................................................................................................................5
(i)........................................................................................................................................5
(ii).......................................................................................................................................5
Part B......................................................................................................................................6
(i)........................................................................................................................................6
(ii).......................................................................................................................................6
(iii)......................................................................................................................................6
(iv)......................................................................................................................................7
Question 3..................................................................................................................................7
Part A.....................................................................................................................................7
(i)........................................................................................................................................7
(ii).......................................................................................................................................8
(iii)......................................................................................................................................8
(iv)......................................................................................................................................8
(v).......................................................................................................................................8
Part B......................................................................................................................................9
(i)........................................................................................................................................9
(ii).......................................................................................................................................9
(iii)......................................................................................................................................9

(iv)....................................................................................................................................10
(v).....................................................................................................................................10
References................................................................................................................................11

QUESTION 1
Loan Data
Original Principal $ 800,000.00
Loan Term (Years) 30
Annual Interest Rate 3.60%
Number of payments per Year 12
Payments per Year $3,637.16
Part A
Formula Amount
(i) Interest paid on the
first month of 25th
Year $598.33
Part B
Formula Amount
(ii) Total Interest paid during the total
life of the Loan
(Payments per
month*Loan
term*No. of
payment per
year)
$ 509,378.61
Part C
Formula Amount
(iii) Present Value of Loan Payments Loan amount
(1/(1+rate of
interest)^no. of
years
$1,144,209.01
Part D
Answer in Part C shows that if an individual has $800,000 for the purpose of investment, then
they can earn interest of ($1,144,209.01-$800,000), i.e. $344,209 in 30 years, however, if the