Question 1 a) A company is due to receive a payment of £500,000 from a customer in 6 months’ time. To smooth its cashflows, the company would prefer to receive the payment immediately, and has agreed to transfer its entitlement to this payment to a third party (a discount house) in return for an immediate payment calculated using a rate of commercial discount of 16% per annum. How much will the immediate payment made by the discount house be? b) An investor puts £5,000 in a savings account that pays 10% simple interest at the end of each year. Compare how much the investor would have after 6 years if the money was: i. Invested for 6 years ii. Invested for 3 years, then immediately reinvested for a further 3 years. c) £250 is invested in a savings account. The nominal rate of interest convertible monthly for the first 3 months is 18% and the nominal rate of interest convertible quarterly for the next 9 months is 20%. How much is in the account at the end of the year? d) You have deposited $1000 in a savings account today, and the interest rate is 5% per year. What is the future value of this cash flow 3 years from today e) The force of interest is given by: ?? 0. ?? = 12 Find an expression for the accumulation factor fro
OPEN UNIVERSITY of MAURITIUS Module Name: Financial Mathematics Tutor: Mr. John Ridge Fok Man Programme: BSc (Hons) Finance and Taxation […]