General Math Questions:

Questions:

(a) A bank account provides 2.5% p.a. interest compounded daily. If an investment of $10,000 is made into that account, to what amount it will grow after 5 years?

(b) How many years it will take an investment of $2,500 to grow to $3,500 if the interest rate is 8.5% p.a. compounded quarterly?

(c) The probability of returns from an asset are as follows:

Probability Return

35% 8%

55% 17%

10% -2%

Determine the risk (i.e., standard deviation of returns) of the asset.

(d) Prepare loan amortisation schedule for a term loan entailing $5,000 borrowed over 2 years at 8.5% p.a. interest repaid annually.

(e) For a rapidly growing German company, the projected growth rate is 10% for the next two years and 7% for the two years following that. At the end of 4 years, the growth rate will expectantly settle to 4% and remain so for the foreseeable future. The company expects to pay a dividend of 2.5 per share next year. Assume that the investors' required rate of return for the company's shares is 20%. Determine the value of this company's share. Is the share a desirable purchase if its market price is 25 per share?

Hints:

For (a), Please note what information (i.e., PV, FV, i, m, & n) are given and which information the question asks to determine.

For (b), please note - a straightforward calculation once you decide what information (i.e., PV, FV, i, m, & n) are given and what value is to be determined. Notably, m is the number of compounding per year, and n is the number of years in the formulae.

For (c), please note similar math . There are multiple steps involved. Please note the relevant formulae and steps.

For (d) please note similar math.

For (e) The answer should be indicated in the currency the question refers. By the way, please also note the dividend information to understand whether D0 is given or D1 is given. Please also note when the constant growth starts. Once the value has been determined, compare it with the market price to decide whether it is a desirable purchase.