  ### Calculate Price

Get a 10 % discount on an order above \$ 100
Use the following coupon code :
Whizz15

# Economic Mathematics

You have to SHOW your work (show how you get the answers) to get credit. The answers to these problems are given to you on a separate file.

Below are the formulas for each type of loan and bonds. Use the respective formula regarding a respective question: for example, on questions regarding a simple loan use the simple loan formula, on questions regarding a fixed payment loan question use the fixed payment loan formula, and so on.

You also have to know the formulas for the test.

Future Value :

FV= future value, PV= present value, i= interest rate, N= number of years.

.

Present Value:

FV= future value, PV= present value, i= interest rate, N= number of years.

Simple loan:

FV = future value, i = interest rate, n = number of years

Fixed payment loan:

FP = fixed payment, i = interest rate, n = number of years

Coupon bond:

P = price of bond, i = interest rate, n = number of years, c = coupon payment, and F = face value of the bond.

P = price of bond, C = coupon payment

F = face value, C = coupon payment

Discount Bond:

P = price of bond, i = interest rate, n = number of years, F = face value

Yield to maturity on a discount bond with less than a year of maturity:

P = price of bond, F = Face value, G = number of days to maturity.

Yield on discount basis on a bond with less than a year of maturity:

P = price of bond, F = face value

Consol bond:

#### P = price of bond, i = interest rate

Bring the answers to the following questions to Class

simple loan:

1. End of ten years you will pay back \$20,000. If I = 6% , how much is the loan amount now.

1. If you borrowed \$9900 at i = 10% to pay back at         the end of 15 years, how much money do you pay          back?

1. You will receive \$35,000 at the end of two Its present value is \$20,000. The yield to maturity equals what?

fixed payment loan:

1. i = 9%, loan = \$15,000, 5 year loan. The fixed payment =___.

1. The fixed payment = \$7000,
1. i= 9%, 3 years, loan =___

coupon bond:

1. coupon payment = \$100, face value = \$6000,             i = 5%, 4 years, a) price of bond =___ b) coupon rate =___               c) current yield =____

1. Coupon rate = 5%, face value = \$12,000, i = 7%   a) price of bond for a) 1 year bond=___,   b) 2 year bond =____   c) 3 year bond =_____

1. if i increases to 12% , what happens to each of the prices (in a) above.

discount bond (zero coupon bond):

1. Face value = \$20,000, price = \$19,000, 1 year bond, ytm = _

1. Face value = \$20,000, price 19,000, 1 year bond , number of days to maturity = 90 days.   a) ytm =_______     b) yield on discount basis =___

1. Face value = \$15,000, 1 year bond, ytm = 6%, number of days to maturity = 180 days. A) price of bond =_______ b) yield on discount basis =___

console bond:

1. i = 7%, price of bond = \$15,000. coupon payment = _

1. Coupon payment = \$200,000 , i = 7%, price of bond =__

1. Price of bond = \$50,000 coupon payment = \$300, ytm = __

Other Problems

1. average interest rate equals 6%, You promised some one to pay her/him \$10,000 at the end of 20 years. If the person insist to paid cash now how much should you give her/him now?

1. Let’s say I am supposed to give you \$12,000 at the end of 5 years, \$16,000 at the end of 7 years, and another \$15,000 at the end of 9 years. If the average rate of interest is 6% and you want to get your money now instead of waiting, how much should I give you?

1. If the average rate of interest is 5%, and you want to receive \$15,000 a year from a trust fund, how much money should you put in the trust fund?

1. If the average rate of interest is 5%, and you deposit \$2,000 a year during the coming 3 years how much money would you have at the end of the 3RD year?.

1. If average interest rate is 7%, and tuition is currently \$6,000 a year, how much would it be at the end of 3 years?

1. You want your mother to receive \$60,000 per year, if the average rate of interest is 5.5%, how much money should you put in a trust fund so your mother would get \$60,000 per year?

Get a 10 % discount on an order above \$ 100
Use the following coupon code :
Whizz15

Category: Sample Questions