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February 9th, 2015, 02:33 PM   #1
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Financial Mathematics problem

Hello everyone,

I have to solve a financial mathematic problem but i have having some difficulties . Can you please guide me ?

1) An investment requires an initial payment of 10, 000 and annual payments of 1, 000 at the end of each of the first 10 years. Starting at the end of the eleventh year, the investment returns five equal annual payments of X. Determine X to yield an annual effective rate of 10% over the 15-year period.

6. A loan of 1, 000 is to be repaid by annual payments of 100 to commence at the end of the fifth year and to continue thereafter for as long as necessary. The effective rate of discount is 5%. Find the amount of the final payment if it is to be larger than the regular payments.

7. You are given an annuity-immediate paying £10 for 10 years, then decreasing by one per year for nine years and paying one per year thereafter, forever. The annual effective rate of interest is 4%. Calculate the present value of this annuity.

8. The real interest rate is 6% and the inflation rate is 4%. Alan receives a payment of £1, 000 at time 1, and subsequent payments increase by £50 for 5 more years. Determine the accumulated value of these payments at time 6 years.


9. There is £40, 000 in a fund which is accumulating at 4% per annum convertible continuously.
If money is withdrawn continuously at the rate of £2, 400 per annum, how long will the fund
last?


10. A loan of £50, 000 is repayable over 25 years by level monthly repayments in arrears of
capital and interest. The repayments are calculated using an effective rate of interest of 8%
per annum.
(a) Calculate the capital repaid in the first monthly installment.
(b) Calculate the total amount of interest paid during the last 6 years of the loan.
(c) Calculate the interest included in the final monthly payment.
(d) Explain how your answers to (ii) would alter if, under the original terms of the loan,
repayments had been made less frequently than monthly.


I am lost.

Thanks in advance,
Maths1996
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February 9th, 2015, 10:23 PM   #2
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WARNING: Beer soaked rambling/opinion/observation ahead. Read at your own risk. Not to be taken seriously. In no event shall the wandering math knight-errant Sir jonah in his inebriated state be liable to anyone for special, collateral, incidental, or consequential damages in connection with or arising out of the use of his beer (and tequila) powered views.

What exactly are you having difficulties with?
They look pretty straightforward to me.
Start with the 1st problem. Show what you've done so far and maybe I (if I'm still awake and plastered) or someone else will guide you along.
jonah is offline  
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