# WK5 Quantitative Techniques In Financial Valuation Apply: Quantitative Techniques in Financial Valuation Problem Set Due Feb 04, 11:59 PM Not Submitted POI

WK5 Quantitative Techniques In Financial Valuation Apply: Quantitative Techniques in Financial Valuation Problem Set

Due Feb 04, 11:59 PM

Not Submitted

POINTS 10

Practice/Simulation/Homework/Game

Objectives:

5.1

5.2

Instructions

Assignment Files

Grading

Resources: Quantitative Techniques in Financial Valuation Problem Set Excel® Template

Save the Quantitative Techniques in Financial Valuation Problem Set Excel® Template to your computer.

Read the instructions on the first tab.

Complete the twelve exercises located in the template and record your answers in the highlighted spaces.

Click the Assignment Files tab to submit your assignment. Instructions:

Week 5 Individual Assignment

Total Number of Questions – 12

Total Points: 6

1. You have twelve problems – on each tab of this Excel file.

2. Please show your work in the cells. Use Excel formulas instead of writing the values/answers directly in the cell.

The instructor will then know where you made a mistake and provide you valuable feedback and partial credit (if appropria

back and partial credit (if appropriate).

Find the interest paid on a loan of $1,200 for three years at a simple interest rate of 5% per year.

How much money will you pay after three years?

Principal

Rate

Time

Simple Interest (SI)

Maturity Value

Find the maturity value of a loan of $1,750 for 28 months at 9.8% simple interest per year.

Principal

Rate

Time

Simple Interest (SI)

Maturity Value

— Please make sure that the time periods for Time and Rate match.

Find the simple interest rate of a loan of $5,000 that is made for three years and requires $1,762.50 in interest.

Principal

Time

SI

Rate

762.50 in interest.

A loan of $16,840 is borrowed at 9% simple interest and is

repaid with $4,167.90 interest. What is the duration of the loan?

Principal

Rate

SI

Time

How much money is borrowed if the interest rate is 9.25% simple interest

and the loan is made for 3.5 years and has $904.88 interest?

SI

Rate

Time

Principal

Find the ordinary and exact interest for a loan of $1000 at a 5% annual

interest rate. The loan was made on March 15 and is due May 15.

Loan date

Loan Due Date

Exact time

Principal

Rate

Time

Ordinary Simple Interest (SI)

days

Loan date

Loan Due Date

Exact time

Principal

Rate

Time

Exact Simple Interest (SI)

days

Find the bank discount and proceeds using ordinary interest for a loan to Michelle Anders for $7,200

at 8.25% annual simple interest from August 8 to November 8.

Loan date

Loan Due Date

Exact time

Face Value (F)

Discount Rate (D)

Time Period (T)

Bank Discount (B)

Proceeds (P)

days

years –> ‘Convert Exact time in days to years

What is the effective interest rate of a simple discount note for $8,000,

at an ordinary bank discount rate of 11%, for 120 days?

Face Value (F)

Discount Rate (D)

Time Period (T)

Bank Discount (B)

Proceeds (P)

Rate

years –> ‘Convert Exact time in days to years

SOLVED EXAMPLE

What is the effective interest rate for the ﬁrst year for a loan of $20,000

for three years if the interest is compounded quarterly at a rate of 12%?

Quoted Rate

12,00% quarterly

No. of compounding

periods per year

EAR

4 For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo

12,55%

1. Ross Land has a loan of $8,500 compounded quarterly for four years at 6%. What is the effective interest rate for the ﬁrst y

Quoted Rate

No. of compounding

periods per year

EAR

For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo

2. Find the effective interest rate for the ﬁrst year for a loan for four years compounded semiannually at an annual rate of 2%

Quoted Rate

No. of compounding

periods per year

EAR

For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo

3. What is the effective interest rate for the ﬁrst year for a loan of $5,000 at 10% compounded daily for three years?

Quoted Rate

No. of compounding

periods per year

EAR

For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo

4. Depending on the issuer, a typical credit card agreement quotes an interest rate of 18 percent APR. Monthly payments are

What is the actual interest rate you pay on such a credit card?

Quoted Rate

No. of compounding

periods per year

EAR

For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo

=EFFECT(B30, B31)

5. Find the effective interest rate for a loan of $3,500 at 10% interest compounded quarterly.

Quoted Rate

No. of compounding

periods per year

EAR

For Quarterly, type 4; for semiannually, type 2; for annually, type 1; for monthly, type 12; fo

=EFFECT(B36, B37)

SOLVED EXAMPLE

Tim Bowling has $20,000 invested for three years at a 5.25% annual rate compounded daily.

How much interest will he earn?

Initial Investment (PV)

Quoted Rate

Compounding Frequency

Number of compoundings (m)

Quoted Rate divided by m = RATE

Number of Years

NPER (Num. of years * m)

Ending Amount (FV)

Compound Interest

$20.000

5,25%

Daily

365

0,0144%

3

1095

$23.411,35

$3.411,35

Choose one

For Quarterly, type 4; for semiannually, type 2; for a

Exercise

Find the future value of a $15,000 money market investment at 2.8% annual interest compounded daily for three years.

Initial Investment (PV)

Quoted Rate

Compounding Frequency

Number of compoundings (m)

Quoted Rate divided by m = RATE

Number of Years

NPER (Num. of years * m)

Ending Amount (FV)

Compound Interest

for semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365

SOLVED EXAMPLE

The Holiday Boutique would like to put away some of the holiday

profits to save for a planned expansion. A total of $8,000 is needed in three years. How much

money in a 5.2% three-year certificate of deposit that is compounded monthly must be invested

now to have the $8,000 in three years?

Future Value Needed (FV)

Quoted Rate

Compounding Frequency

Number of compoundings (m)

Quoted Rate divided by m = RATE

Number of Years

NPER (Num. of years * m)

Amount Invested Now (PV)

$8.000

5,2%

Monthly

12

0,4333%

3

36

$6.846,78

Choose one

For Quarterly, type 4; for semiannually, type 2; for a

Exercise

How much should be invested now to have $15,000 in six years if interest is 4% compounded quarterly?

Future Value Needed (FV)

Quoted Rate

Compounding Frequency

Number of compoundings (m)

Quoted Rate divided by m = RATE

Number of Years

NPER (Num. of years * m)

Amount Invested Now (PV)

r semiannually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365

Jamie Juarez needs $12,000 in 10 years for her daughter’s college education.

How much must be invested today at 2% annual interest compounded

semiannually to have the needed funds?

Future Value Needed (FV)

Quoted Rate

Compounding Frequency

Number of compoundings (m)

Quoted Rate divided by m = RATE

Number of Years

NPER (Num. of years * m)

Amount Invested Now (PV)

Choose one

For Quarterly, type 4; for semiannually, type 2; for annually, ty

A loan of $8,000 for two acres of woodland is compounded quarterly at an annual

rate of 6% for ﬁve years. Find the compound amount and the compound interest.

Initial Investment (PV)

Quoted Rate

Compounding Frequency

Number of compoundings (m)

Quoted Rate divided by m = RATE

Number of Years

NPER (Num. of years * m)

Ending Amount (FV)

Compound Interest

Choose one

For Quarterly, type 4; for semiannually, type 2; for annually, ty

ually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365

ually, type 2; for annually, type 1; for monthly, type 12; for daily, type 365

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