Answer & Explanation:HiNeed to be done in 24 hours. Leave best price
20161006170419financial_maths_1.docx
Unformatted Attachment Preview
-Use a computing tool (e.g. Excel/Google Spreadsheets or Python) for financial calculations.
-Use a financial information system (e.g. Reuters Eikon, or the Internet) for obtaining market data and
information as well as harnessing well-documented API/library/models to make inferencing more
expedient
– You are required to present your answer in excel spreadsheet or python with working or steps. Do not
provide answer without working.
Question 1
The concept of the time value of money highlights the dynamic growth nature of money in a financial
environment that aggressively competes for funds. Answer the following questions in relation to the
concept:
(a) Describe the nature of the time value of money and how it arises in reality. (10 marks)
(b) Do the following exercises:
1) What is the future value after 120 days of $43 invested at 7.5%?
2) You invest $1,000 and receive back a total of $1,360.86 at end of 7 years. There was no interest
payments during the 7 years. What annual yield does this represent?
3)You receive 12% paid annually. What are the equivalent quarterly rate and monthly rate?
Be sure to express your answers clearly in your own words, based on your own understanding, with
Python as an aid in your calculations and reasoning. (10 marks)
________________________________________________________________________________
Question 2
Statistical concepts are important whenever we are required to reason with a large amount of data.
Answer the following questions in relation to this idea:
(a) Review three (3) fundamental concepts in statistics in relation to financial data in a
clear fashion that can be understood by your friend without a face-to-face explanation.
(10 marks)
(b) Do the following exercises:
1) What are the median, mode, arithmetic mean and geometric mean of the following numbers?
13, 7, 13, 4, 10, 15, 4, 12
2) What is the estimated standard deviation of the price of a cup of coffee in Manchester? You have the
following sample data from six cafes:
95 pence
250 pence
160 pence
124 pence
180 pence
175 pence
3) Given a set of monthly returns with mean 1.2% and annual standard deviation 8%, assuming a normal
probability distribution, what is the probability of a return worse than -5% over 1 month (i.e. one twelfth
of a year)?
Be sure to express your answers clearly in your own words, based on your own understanding,
with Excel as an aid in your calculations and reasoning. (10 marks)
_____________________________________________________________________________________
Question 3
The equity market is one of several major financial markets that are found in the world. Answer the
following questions on this important market:
(a) Outline the significance of the word “equity” in the present usage. (10 marks)
(b) Do the following exercises:
1) Given the following data, what are the ROE, EPS, P/E ratio, P/B ratio and earnings yield?
Total earnings during the year : $40 Million
Book value:
$250 Million
No. of ordinary shares in issue: 15 Million
Current share price:
$21.93
2) Given the following data, what is the share value according to the Gordon model, and what is the
percentage fall in the share value if the dividend growth rate falls to 7%?
Current dividend per share:
$1.03
Expected annual growth rate of the dividend: 8%
Investor’s required rate of return:
10%
3) Given the following data, what is the share’s yield according to the T-model and the Gordon model?
Total earnings during a year:
$35,450,000
Book value at start of the year:
$250 Million
No. of ordinary shares in issue:
15 Million
Share price at start of the year:
$19.06
Share price at end of the year:
$21.93
Dividend per share during the year:
$1.03
Growth rate of book value:
8%
Expected growth rate of dividend:
8%
Be sure to express your answers clearly in your own words, based on your own understanding, with
Python as an aid in your calculations and reasoning. (10 marks)
____________________________________________________________________________________
Question 4
A company, StarMoon Pte. Ltd., has recently paid dividends of $2 per share. According to stock analysts,
the dividend is expected to grow at a constant rate of 4% for the next 5 years. After that, the dividend is
expected to grow at the lower rate of 2% annually. Assume that the risk-free rate is 1.5%, the beta of
the stock is 1.5 and the expected market return is 3%.
(a) Calculate the value of StarMoon’s stock per share. (10 marks)
(b) If dividend is expected to be held constant after year 5 instead, re-calculate the value of StarMoon’s
stock per share. (10 marks)
Assume that it is currently 1 Jan and dividends are paid out at the end of each year in your answer.
Show your workings clearly with calculations performed on Excel.
_________________________________________________________________________________
Question 5
Joachim opened a savings account with a bank for 5 years. He deposited $5,000 and $3,000 respectively
in the first two years. In the third year, he bought a new house and could not save any money. In the 4th
year, he withdrew $1,000. In the final year, he neither saved nor withdrew from his account.
If the annual prevailing interest rates for the 5 years turn out to be as follows:
Year
1st
2nd
3rd
4th
5th
Interest Rate
3.5%
3.7%
3.9%
4.1%
4.3%
Compute the amount of money that is found in his bank account at the end of 5 years, assuming that
deposits are made at the BEGINNING of the year. Show your workings clearly with calculations
performed with Python. (20 marks)
…
Purchase answer to see full
attachment
Order a plagiarism free paper now. We do not use AI. Use the code SAVE15 to get a 15% Discount
Looking for help with your ASSIGNMENT? Our paper writing service can help you achieve higher grades and meet your deadlines.
Why order from us
We offer plagiarism-free content
We don’t use AI
Confidentiality is guaranteed
We guarantee A+ quality
We offer unlimited revisions