Finance Applications: Module 10 Assignment Solution

This assignment provides a detailed solution to the Finance Applications Module 10, covering key financial concepts. The solution begins by addressing depreciation, including both straight-line and reducing-balance methods, and provides the relevant formulas, variable identifications, and formula transpositions. It then delves into percentage calculations and simple interest, explaining how to convert percentages to decimals and time units to years. The assignment concludes with compound interest, providing the formula and demonstrating how to substitute values for different compounding frequencies and time periods. This comprehensive solution offers a clear understanding of essential financial concepts and calculations, making it a valuable resource for students studying finance.

FINANCE APPLICATIONS
MODULE 10
STUDENT ID:
[Pick the date]

Question 1
a) The general formula for straight line depreciation is shown below.
Annual depreciation (D) = (C-S)/n
Where C = cost of asset
S = Salvage value of asset
n = Useful life of asset
Rearranging the above, we get n = (C-S)/D
b) The general formula for reducing balance depreciation is shown below.
D = P –P(1-i)n
Where P =Price of asset, D = Depreciation, n = number of years, I = rate of depreciation
The above formula can be written as follows by taking P as common.
D = P (1-(1-i)n)
The above can be rewritten with P as subject as indicated below.
P = D/(1-(1-i)n)
Question 2
c) 100
d) The formula for simple interest is as follows.
SI = (P*R*T)/100
Where SI = Simple interest, P = Principal, R = Rate of interest (in%), T = Time
e) i) decimal

Rate can be converted from percentage to decimal by dividing he value in percentage by 100.
ii) years
In order to convert days and months into years, divide the days by 365 and months by 12.
Question 3
f) The formula for compound interest is as shown below.
CI = P(1+i)n – P
Where P = Principal, CI = Compound Interest, I = rate of interest and n = number of time
periods.
g) I = (6/1200) = 0.005
h) n = 10*4 = 40 since there are four quarters in one year.