Contacto ACC515203060 SMI Version 1. Published 25 June 2020 Page 121 Assessment item 2 - Topics 1-5 Value: 20% Due Date: 26. Aug-2020 Return Date: 16-Sep-2020 Submission method options: Alternative submission method TASK Note:For numerical problems, detailed worked solutions must be shown. This involves providing a brief description of the problems, formulae used, progressive and final solutions to the problems. The use of excel built-in functions is not permitted. Question 1: [Total 10 marks;5 marks for each part) (a) Mary is planning to retire in 10 years, and buy her dream home in Nelson Bay, NSW. The house is currently priced one million in the marketand is expected to grow in value each year at a 5% rate. Assuming that she can eam 10% annually on her investments, how much must she invest at the end of each of the next 10 years to be able to buy her dream home when she retires? (b) Amy borrowed $10,000 today. She is required to repay equal amounts at the end of each of 7 years, with the first payment starting in four years' time. The relevant interest rate is 8% per annum. How much will be the amount of each payment? Question 2: (10 marks) Company A is emphasising the need to create and maximise wealth for the shareholders, while Company B believes that maximising profit of the company should be the priority Which company do you think adopts the correct strategy? Make a critical evaluation with examples. Question 3: (Total 15 marks; 5 marks for each part) (a) Rowan has invented a new household device that would eam him $ 12,000 per annum for the next 10 years. Given an interest rate of 10% compounded annually, would Rowan be willing to sell his invention today for $100,000? (b) Kate won a lottery that will make a payment $100,000 every year, starting today, for the next 10 years. Fshe invests the payments at a rate of 4.00% per year, what is the present value of the cash flows over the 10 year period Interest for the 10 equal payments will be compounded at the end of each year. (c) Property Trust Bank pays its clients 8% interest per annum, compounded on a semi-annual basis. To remain competitive, the bank's major competitor, Mortgage Trust Bank is willing to match the interest rate offered by Property Trust Bank, but interest will be compounded on a quarterly basis. What nominal rate of interest must Mortgage Trust Bank offer to its clients? Carles Sturt Univery SetOutline NCCS15202000SMI Version 1. Ped 26 June 2000 Contacto ACC515203060 SMI Version 1. Published 25 June 2020 Page 121 Assessment item 2 - Topics 1-5 Value: 20% Due Date: 26. Aug-2020 Return Date: 16-Sep-2020 Submission method options: Alternative submission method TASK Note:For numerical problems, detailed worked solutions must be shown. This involves providing a brief description of the problems, formulae used, progressive and final solutions to the problems. The use of excel built-in functions is not permitted. Question 1: [Total 10 marks;5 marks for each part) (a) Mary is planning to retire in 10 years, and buy her dream home in Nelson Bay, NSW. The house is currently priced one million in the marketand is expected to grow in value each year at a 5% rate. Assuming that she can eam 10% annually on her investments, how much must she invest at the end of each of the next 10 years to be able to buy her dream home when she retires? (b) Amy borrowed $10,000 today. She is required to repay equal amounts at the end of each of 7 years, with the first payment starting in four years' time. The relevant interest rate is 8% per annum. How much will be the amount of each payment? Question 2: (10 marks) Company A is emphasising the need to create and maximise wealth for the shareholders, while Company B believes that maximising profit of the company should be the priority Which company do you think adopts the correct strategy? Make a critical evaluation with examples. Question 3: (Total 15 marks; 5 marks for each part) (a) Rowan has invented a new household device that would eam him $ 12,000 per annum for the next 10 years. Given an interest rate of 10% compounded annually, would Rowan be willing to sell his invention today for $100,000? (b) Kate won a lottery that will make a payment $100,000 every year, starting today, for the next 10 years. Fshe invests the payments at a rate of 4.00% per year, what is the present value of the cash flows over the 10 year period Interest for the 10 equal payments will be compounded at the end of each year. (c) Property Trust Bank pays its clients 8% interest per annum, compounded on a semi-annual basis. To remain competitive, the bank's major competitor, Mortgage Trust Bank is willing to match the interest rate offered by Property Trust Bank, but interest will be compounded on a quarterly basis. What nominal rate of interest must Mortgage Trust Bank offer to its clients? Carles Sturt Univery SetOutline NCCS15202000SMI Version 1. Ped 26 June 2000
