Financial Calculations and Analysis

Ques 1
I. The amount of deposit that Scott and Helen have already saved is $
50,000 and the cpst of the house is $600,000, thus, they would require
a loan of $ 550,000.
Instalment for a loan of $550,000 for a period of 25 years and at a rate of
interest of 6%, would be $3,544.
ii. Repayment schedule is provided in the excle file of the solution
iii. If after 10 years, the bank reduces the rate of interest to 4.8%, and Scott and
Helen wants to repay the loan in 10 years, the revised installment, that they
need to pay shall be $3,571.
Ques 2:
(i)
In case Jim makes the first deposit of $20,000 today and further invests $5,000
p.a for next 8 years and $ 10,000 for 8 more years
The amount available with Jan at her 17th birthday, given the rate of interest of
5%p.a. would be $170,042.
(ii)
If Jan intends to withdraw the amount in equal installments for 5 years, after her
17th birthday, she would be able to make withdrawls of $3,055 per month.
The schedule is given in the excel file.
Ques 3:
(i)
The annual return on S&P/ASX 200 is2.82% (negative) , whereas the annual
return provided by accumulation Index is 6.43%
Thus, The difference between the annual return for the two indices, viz., S&P/ASX
200 and accumulation index is 9.25%.
(ii)
For the given returns, for 5 years, the geometric mean is 2.8% and arithmetic
mean is 2.86%
Ques 4:
The future value of the amount invested by Fran for 15 years would be $
800,943.51 at the end of 15 years -and Fran would be able to get another
$200,000 as a result of shifting to a small size apartment from his current house.
Thus, Fran would have total 1,000,943.51 to survive on.