FIN 320 Exam 1

Name

Mao Li_

1.

You borrow $150,000 from Bank ABC to buy a $120,000 home. What monthly payment is
required to repay the loan and interest over 360 months financed at 5% per annum
compounded monthly?
1. ($805.23)

2.

a. In #1 above, at the end of the 30 years of payments, what is the total amount of
interest you will have paid to the bank?
2a. $67,016.16
b. If the rate in #1 above had been 6%, what total amount of interest would you have
paid to the bank?
2b. $903,386.28

3. You put $1200 into a 529 fund on each of your childs even numbered birthdays starting
with the second and ending with the 16th. If the fund earns 6% per year over the
investment period, calculate the size of the fund at the end of the 16th birthday.
3.$27,931.16
4.

A particular machine is replaced when its cost effectiveness decreases to 50% of what
it was upon installation. Assuming a machines cost effectiveness decreases at the
rate of 6% per year, how many years is it used before it is replaced?
Say Machine is equalto $50 .06*50=3 3*8.33=24.99

4. ____8.33_____

5. Retirement planners suggest that you should accumulate a retirement fund of

$2,000,000. What equal monthly amount must you invest for 45 years if all funds earn
6% per annum compounded monthly for all periods.
Fv=2000000 N=45x12 I=.06

5. ____3135.27____

6. If in #5, you wait just five years to start investing, how much more per month must
you invest to accumulate the $2,000,000 in 40 years?
FV=-2000000 N=40*12 I=.06
6. ____3594.51___
7. What is the effective annual rate of 6% compounded for each of the following periods?
Give answers as x.xxxxx%
a. Semiannually: ___6.168%__. b. Monthly:
_6.184%____.

__6.136%___.

c. Daily (365):__6.183%__.

d. Continuously:

8. What is the value of a 20-year bond with a maturity value of $1,000 and a semiannually
coupon of $50.00, if sold to yield 6% per annum?
N=20 I=.06 FV=-1000 PMT=-50 PV=
8. ____885.30___
9.

What is the annual yield to maturity of the bond in #8 if it currently sells for
$600.00?

N=20 I=

FV=-1000 PMT=-50 PV=600

9.____9.56%___

10. To attend 3 years of law school you borrow $30,000 on July 1 and January 1 for 3
years at 6% per year compounded monthly. You will repay the loans and accumulated
interest, monthly, after you graduate. If you graduate on May first, how much
will you owe upon graduation?
10. _____________
11.

Amortize $5,000 monthly over five years at 6%:

Month

PAYMENT

INTEREST

PRINCIPAL
PAID

UNPAID
PRINCIPAL

_(96.66)_____

____25______

____(71.66)__

____4,928.34__

__(96.66)______

____24.64___

_____(72.02)_

___4,856.31___

12.

__(96.66)_____

____24.28___

_____(72.38)_

___4783.93__

__(96.66)_____

___23.92___

____(72.74)__

____4,711.19__

For X = {1,0,1,2,3,4} then Y = {4,6,4,8,12,10}, find the following equations:

13.

Line through first & last points:

Y = __2000__ + __2000____ X

Regression line of all points:

Y = ___4.062___ + __1.785___ X

A $1,000, ten year, 6% coupon bond sells for $800.00.

assuming a constant yield to maturity.
Year

Bond value

___(368.78)___

___(410.65)__

R2 = _.647__

Complete the following

Capital gain%

Current Yield%

__11.354%____

__-14.611%__

YTM

____-4.916%__

14, & 15
Given a desired 12% return, find the present values of each dividend growth pattern
for two dollars last year, increased by 20% each year for 10 years, followed by 12%
increases for another 10 years, followed by 0% increases for another 10 years, then
finally followed by 2% DECREASES each year thereafter forever.
Present Values

Calculations

PV of D1-D10

________________

______________________________________

PV of D11-D20

________________

______________________________________

PV of D21-D30

________________

______________________________________

PV of D31-Dn

________________

______________________________________

16.

Government spending was 1,561 billion in 1996. Fifteen years later, the budget
calls for spending 3,840 billion. What was the compounded growth rate of
government spending?
16. ____6.18%______

18. Year

Price

1
2
3
4

80.00
100.00
90.00
100.00

Dividend
2.00
2.10
2.20
2.40

a, Average Capital Gain % _____8.704%________

25,-10,11.11
b. Average dividend yield% ______2.36%_______
c. Estimated Dividend growth rate% ____6.28%____
5, 4.76, 9.09

19. Assume your starting salary is $50,000 per year and it will grow at a compounded
4% per annum for 45 years. If you are able to invest 5% of your salary into a
fund earning 6% per year, what is the future value of the fund at the end of 40
years?
19. ______________
20. Current DJIA _17071.22___, S&P500 __1977.80___, T-Bill (90 day) _.03_, Prime rate
3.25_____
Approximate one year CD rate ___.7___, 30 year mortgage rate _4.3____