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**QUESTIONS:**

- A deposit of $500 (PV) made five years ago is worth $705.30 today (FV). The deposit pays interest
**semi-annually**. What is the**interest rate**?

**Note:** If you press √ means that the reciprocal of power 2 (^2). In this calculation, it refers to power 10@ ^ 10, therefore 10√

From calculator, you press 10 then SHIFT then ^..10 ^{x}√ 1.4106

** FV = PV (1 + r) ^{t}**

** FV = PV (1 + r/2) ^{tx2 }– semiannually**

- How much would you have had to invest 21 years ago (t) in an account paying 6%(r) compounded annually to cover the cost of a $15,000 (FV) engagement ring for your fiancé?
- Approximately how many years must one wait for an initial investment of $10,000 to triple in value if the investment earns 9% compounded annually?
- During one year on a $250 deposit paying continuously compounded interest at an APR of 8%, how much interest can be accumulated?

**Interest = principal****´****rate****´****term (n)** - If your trust fund promises to pay you $25,000 on your 24th birthday (6years from today) and earns 9% compounded annually, then what is the trust fund’s present value?
- If a $10,000 investment will return $25,000 to you in five years, then to the nearest percent what annual interest rate is being offered?

**FV = PV (1 + r)**^{t} - What is the present value of the following payment stream at an interest rate of 7%; $1000 today, $2000 at the end of year 1, $5000 at the end of year 3, $6000 at the end of year 5.
- What is the present value of perpetuity of $1000 per annum starting immediately offering a 12% interest rate? (3 marks)
**PV perpetuity = FV / i** - What is the APR on a 48-month loan on an $18,000 car, if you put $3000 down payment and the monthly payments are $373.28

*m***= number of payments in a year***c***= annual interest cost****N = total number of payments****P = principal of the loan**- In order to buy a $25,000 car making $500 monthly payments for 48 months at 8%, how much will your down payment be?Monthly Payment =
- $10,000 borrowed at 8% is to be repaid in four equal annual payments. How much of the principal is amortized with the first payment
- A bond matures in 12 years and pay 8 percent coupon annually. The bond has face value of RM1000 and currently sells for RM985. What is the bond’s current yield and yield to maturity?

- Current yield. (2 marks)

**Coupon Payment = CR% x Par value****Current Yield (%) =**__Coupon Payment__**Value or Price of Bond**- Yield to maturity. (answer:8.19%)

(4 marks)

**YTM =**__CP + (PV – Vb)/n__**(PV + Vb)/2**- Kufman Enterprise has bonds outstanding with a RM1,000 face value and 10 years left until maturity. The bonds have an 11 percent annual coupon payment. The current price of these bonds is RM1,175. Calculate:

- Current Yield (CY).

(2 marks)

- Yield To Maturity (YTM).

(4 marks)

- A bond that matures in 10 years sells for RM985. The bond has a face value of RM1,000 and a 7 percent annual coupon. Calculate;

- Current Yield (CY).

(2 marks)

- Yield To Maturity (YTM).

(4 marks)

- A 10-year, 12 percent semi-annually coupon bond, with a par value of RM1,000 sells for RM1,100. Calculate;

- Current Yield (CY).

(2 marks)

- Yield To Maturity (YTM).

(4 marks)

- A bond matures in 7 years sells for RM1,020. The bond has a face value of RM1,000 and a yield to maturity of 10 percent. The bond pays coupons annually. What is the bond current yield?

(2 marks)

Step 1 Find the coupon payment

**YTM (%) =**__Coupon Payment+ (Par Value – Bond Price)/ t__**(Par Value + Bond Price)/2****Current Yield (%) =**__Coupon Payment__**Value or Price of Bond**- The loan amount RM25,000 with nominal interest rate of 11 percent. Interest is calculated on a simple interest basis with a 365-day year. What is Minnerly’s interest charge for the first month (assuming 31 days in the month).

(2 marks)

**Interest = principal****´****rate****´****term (n)**

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