Financial Mathematics Assignment

Added on - 21 Jul 2020

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Financial Mathematics
Table of ContentsIntroduction......................................................................................................................................1Question 1........................................................................................................................................1A).................................................................................................................................................1B)................................................................................................................................................1C)................................................................................................................................................1D).................................................................................................................................................2E)................................................................................................................................................2Question 2........................................................................................................................................2A:................................................................................................................................................2B):...............................................................................................................................................3Question 3........................................................................................................................................31...................................................................................................................................................32...................................................................................................................................................63...................................................................................................................................................84...................................................................................................................................................86...................................................................................................................................................97...................................................................................................................................................98...................................................................................................................................................9Conclusion.....................................................................................................................................10References.....................................................................................................................................11
IntroductionIn the business there are various decisions which will have to be made and for thatdifferent calculations should be made. All of that will be covered under business mathematics.The main aspect which is involved in this is calculations which are made in terms of fianancialfactors. In this report different values will be identified with the use of several fianacial methodswhich are present in relation to financial management (Cole, Paulson and Shastry, 2016). Thereare calculations which will be made in respect of the manner in which present values and othercalculations about annuity will be made. Also the concept of capital asset pricing model will beused by that the cost of capital will be determined. The calculation for the returns which will beearned on monthly basis will be identified that will further be used to know the average rate ofreturn made by the organisation. All of these will be understood with the help of solutions whichare provided in the report provided below.Question 1A).B).Couple invest their lottery amount of 1,80,000. for the 4 years with the intention to getthe equal monthly amount for 180 months. Hence, he invested their $180000 for the 4 years.Then they will get of $262538 after investing of $180000 for 4 years. They will get of $1464.1for 180 equal payment.Future Value= Present value( 1.10)^4Fv=180000(1.1)^4=$262538.C).Future Value of annuity= Present value[(1+r)^number of year-1]Rate of returnFv=4000[(1+0.05)^10-1]0.05In December 2017, She will get $50311.55.1
D).Present value= Annuity[(1+0.06)^10-1] * (1.06)^100.0620000[(1.06)^10-1]0.06 (1.06)^10=$1,47,200Hence, Mary tone will take the lump sum payment of $1,50,000.E).Present value= Annuity/ Rate- Growth=hence cost of annuity = 1000/.12-.10= $50000.Question 2A:The concept of shareholder wealth maximisation is based on the rule which states that thedirect operating goals and the objectives of a public business firm and that should help to gainmaximum return on equity. Shareholder wealth is said to be present values of what is expectedfuture return will be gain to its owners of the firm (Chavez-Demoulin and McGill, 2012).Generally those return which are made in terms of periodic form of dividend and continued fromthe sale of inventory. Shareholder is associated with the business context which is based on thatconcepts that ultimately influence company success up to the extent to enrich shareholderinterest. There are various aspect of business which are used by the company in order to generatemore profit and make the company profitable in coming future. These are:Wealth maximisation:The main objectives of this concept is to increase the marketvalue and share as well. Another is to maximise net present value of shareholder that arerelated with company growth. Under this company generated profit in terms of cashflows. The advantage of wealth maximisation is to create shareholder interest as well ascreditors interest and so on. It also ensures that company should work in to createeffective return to the shareholders through building reserves for growth and maintainfinancial discipline in an organisation.Maximisation of profit to the notion:It is associated with the profit that is earned by anorganisation during the period of time. It measure goals which are implies that2
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