Assignment

Name: ID: SEC:

1. Find the future value of the following annuities:

| Annual Deposit | Interest rate |

Annuity 1 | $400 (at the end of each year) | 12% |

Annuity 2 | $200 (at the end of each year) | 6% |

Annuity 3 | $200 (at the beginning of each year) | 6% |

Do you see any difference between the results of Annuity 2 & 3? If yes, explain the reason for the difference.

2. Find out the present value of the following cash flow streams: (discount rate is 10.5%)

Year | Cash Stream A | Cash Stream B |

1 | $100 | $300 |

2 | 400 | 400 |

3 | 400 | 400 |

4 | 400 | 400 |

5 | 300 | 100 |

3. What is the present value of following uneven cash flow pattern (Discount rate = 10%)? Assume that the discount rate is 12%. Is it a single cash flow or annuity or a mixed flow problem?

0 1 2 3 4

| | | | | |

| | | | | |

Tk. 100 250 350 550

4. Suppose, you have taken a loan of Tk. 20,000 today that has to be repaid in 4 years by paying 4 equal annual payments. Interest rate on this loan is 15%.

Requirements:

a. How much should be the size of each installment?

b. Prepare a loan amortization schedule

c. How much interest will you pay and the bank receive in the 2nd year?

5. Mr. H wants to buy a car. His banker offered him loan of Tk. 1,000,000 at a 12% annual rate for 5 years. What will his monthly payment be provided that he makes equal monthly installments over the next 5 years?

6. You are considering a monthly home loan with a nominal rate of 5 %. What is the effective annual rate of interest on the loan?

7. Mr. Early Saver has decided to invest Tk. 1,000 at the end of each year for the next 10 years, then he will just let the amount compound for 40 additional years.

His brother, Late Saver, has a different investment program: He will invest nothing for the next 10 years, but...