Financial report
FINA 5501 FINANCIAL MANAGEMENT
2012 F2 ASSIGNMENT 1
Answer all questions (show workings to earn full marks)
1. Your sister requires tuition of $18500 ten years from now when she goes to college. If the interest rate is 5% per year, annually compounded, find how much you will have to invest today to get that amount.
2. You triple $500 in 3 years. compounding? What is the annual interest rate, assuming annual
3. Suppose your company expects to increase unit sales of watches by 15% per year for the next 5 years. If you currently sell 3 million watches in one year, how many watches do you expect to sell in 5 years?
4. Suppose you have $500 to invest and you believe that you can earn 8% per year over the next 15 years.
a.
How much would you have at the end of 15 years using annual compounding?
b.
How much would you have using simple interest?
5. Your parents set up a trust fund for you 10 years ago that is now worth $19,671.51. If the fund earned 7% per year annual compounding, how much did your parents invest?
6. Suppose you are offered an investment that will allow you to double your money in 6 years. You have $10,000 to invest. What is the implied annual rate of interest?
7. Suppose you are offered the following investment choices:
You can invest $500 today and receive $600 in 5 years. The investment is considered low risk. Or you can invest the $500 in a bank account paying 4% annually. What is the implied annual interest rate for the first choice and which investment should you choose?
8. Suppose you want to buy some new furniture for your family room. You currently have
$500 and the furniture you want costs $600. If you can earn 6% annual compounding, how long will you have to wait if you don’t add any additional money?
9. You are considering an investment that will pay you $1000 in one year, $2000 in two years and $3000 in three years. If you want to earn 10% annual compounding on your money, how much would you
2012 F2 ASSIGNMENT 1
Answer all questions (show workings to earn full marks)
1. Your sister requires tuition of $18500 ten years from now when she goes to college. If the interest rate is 5% per year, annually compounded, find how much you will have to invest today to get that amount.
2. You triple $500 in 3 years. compounding? What is the annual interest rate, assuming annual
3. Suppose your company expects to increase unit sales of watches by 15% per year for the next 5 years. If you currently sell 3 million watches in one year, how many watches do you expect to sell in 5 years?
4. Suppose you have $500 to invest and you believe that you can earn 8% per year over the next 15 years.
a.
How much would you have at the end of 15 years using annual compounding?
b.
How much would you have using simple interest?
5. Your parents set up a trust fund for you 10 years ago that is now worth $19,671.51. If the fund earned 7% per year annual compounding, how much did your parents invest?
6. Suppose you are offered an investment that will allow you to double your money in 6 years. You have $10,000 to invest. What is the implied annual rate of interest?
7. Suppose you are offered the following investment choices:
You can invest $500 today and receive $600 in 5 years. The investment is considered low risk. Or you can invest the $500 in a bank account paying 4% annually. What is the implied annual interest rate for the first choice and which investment should you choose?
8. Suppose you want to buy some new furniture for your family room. You currently have
$500 and the furniture you want costs $600. If you can earn 6% annual compounding, how long will you have to wait if you don’t add any additional money?
9. You are considering an investment that will pay you $1000 in one year, $2000 in two years and $3000 in three years. If you want to earn 10% annual compounding on your money, how much would you