Project #155242 - Financial Mathematic

Mathematics Tutors

Subject Mathematics
Due By (Pacific Time) 11/25/2016 07:00 pm

 

1. Mr Smith needs € 7 000 in 10 years time in order to pay for his daughter to go to college. How much must he invest this year in order to be able to pay her fees, assuming that he will receive a constant 3 % yearly compounded interest on his investment? (20 points)

 

 

 

 

 

 

 

2. A banker invests € 10 000 into two different funds. The first, fund P, accumulates simple interest at a rate of 7 % / annum. The second, fund Q, accumulates compound interest at a rate of 5 % / annum, where the accumulated interest is added to the fund at the end of each calendar year.

 

 

 

  1. What would the compounding factors for fund P and fund Q be after 5 years? (10 points)

 

 

 

  1. In which year of the value of fund P equal fund Q? (10 points)

 

 

 

  1. At the end of which year will the value of fund Q become greater than the value of fund P? (10 points)

 

 

 

 

 

 

 

3. You have just brought a house. In order to buy the house you took out a € 175 000 mortgage, with a 5 % fixed interest rate from the bank. The term of the mortgage is for 25 years, during which time, the amount and any interest accrued must be fully repaid.

 

 

 

    1. Calculate the annual repayment (Pmt) of the mortgage (20 points)

    2. Construct a table of payments in excel for this 25 year Mortgage. Please use the structure shown below. (30 points)

 

Year

Start Amount

Pmt

Interest

Principle

End Balance

1

 

 

 

 

 

2

 

 

 

 

 

...

 

 

 

 

 

25

 

 

 

 

 

 

 

 

 

 

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