Description

Question 1

Use Python to answer this question.

(a) Select a stock and obtain the stock prices for a one-year period. Create a histogram of

its daily returns.

(10 marks)

(b) Calculate the daily price volatility of the stock and explain its significance.

(10 marks)

(c) Find the chain of call and put options available on this stock using either Eikon or the

internet. Describe what a call option is and explain the information given for each call

option.

(10 marks)

Question 2

Use Excel in your calculations. May purchases a house for $2.5 million and makes a down

payment of 40% of the purchase price. She borrows the rest from the bank on a 25-year loan,

which charges her 1.2% for the first year and 1-year SIBOR + 0.35% thereafter.

The monthly payment of a variable-rate loan is calculated as if it is a fixed-rate loan on the

outstanding loan balance and time remaining on the loan, whenever

FIN201 Tutor-Marked Assignment

SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS) Page 3 of 4

Question 3

Use Excel in your calculations. The yield on 10 year Singapore Treasury bonds is 3% and the

market return is 5%. You are studying UniSUSS stock which has a beta of 1.2. UniSUSS has

just paid a dividend of 1.20 and expects dividends to grow at a rate of 4% per annum for the

next 5 years, and to slow down to 2% growth per annum thereafter.

(a) Calculate the discount rate you should apply to UniSUSS stock.

(5 marks)

(b) What is the intrinsic value of UniSUSS stock?

(10 marks)

(c) If dividends stop growing after the first 5 years, what is the intrinsic value of

UniSUSS stock?

(5 marks)

Question 4

Answer the following questions using Python.

Trunk Company plans to invest in Project A with the following estimated annual cash flows:

Yr 1 $ 20,000

Yr 2 $ 90,000

Yr 3 $ 180,000

Yr 4 $ 220,000

Yr 5 $ 150,000

The project costs $500,000. The required return for this project is 5% compounded quarterly.

Trunk Company looks at another Project B which might potentially be better than Project A.

Project B has the following cash flows:

Yr 1 $ 150,000

Yr 2 $ 220,000

Yr 3 $ 180,000

Yr 4 $ 90,000

Yr 5 $ 20,000

This project also costs $500,000. The required return for this project is 5% compounded

quarterly, same as Project A.

(a) Compute the IRR of Projects A and B, and propose whether to accept or reject each

project, assuming there are unlimited funds. Explain your decision.

(10 marks)

FIN201 Tutor-Marked Assignment

SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS) Page 4 of 4

(b) Calculate the NPV of each project. Propose whether to accept or reject each project

based on NPV, and choose one project, assuming the Company has funds only for one

project. Explain your decision.

(10 marks)

(c) Explain why one of the projects is superior although the cash flows are the same

except that they are received in different years. What should the cost of the inferior

project be in order to make you indifferent to either project?

What is the resulting annual discount rate of the inferior project?

(10 marks)

FIN201

Financial Mathematics

Tutor-Marked Assignment/TMA01

January 2018 Presentation

FIN201

Tutor-Marked Assignment

TUTOR-MARKED ASSIGNMENT (TMA)

This assignment is worth 25% of the final mark for FIN201, Financial Mathematics.

The cut-off date for this assignment is 9 April 2018, 2355 hours.

Question 1

Use Python to answer this question.

(a)

Select a stock and obtain the stock prices for a one-year period. Create a histogram of

its daily returns.

(10 marks)

(b)

Calculate the daily price volatility of the stock and explain its significance.

(10 marks)

(c)

Find the chain of call and put options available on this stock using either Eikon or the

internet. Describe what a call option is and explain the information given for each call

option.

(10 marks)

Question 2

Use Excel in your calculations. May purchases a house for $2.5 million and makes a down

payment of 40% of the purchase price. She borrows the rest from the bank on a 25-year loan,

which charges her 1.2% for the first year and 1-year SIBOR + 0.35% thereafter.

The monthly payment of a variable-rate loan is calculated as if it is a fixed-rate loan on the

outstanding loan balance and time remaining on the loan, whenever the variable rate is

changed.

(a)

Compute the monthly payment she has to make in the first year. What is the loan

balance remaining at the end of one year?

(8 marks)

(b)

Calculate the monthly payment she has to make in the second year assuming the 1year SIBOR is 1.7%. What is the loan balance remaining at the end of two years?

How much was the interest and principal repayment made at the end of two years?

(8 marks)

(c)

What is SIBOR? From your understanding of SIBOR, explain if the (mortgage) loan

rate can ever be less than SIBOR?

(4 marks)

SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS)

Page 2 of 4

FIN201

Tutor-Marked Assignment

Question 3

Use Excel in your calculations. The yield on 10 year Singapore Treasury bonds is 3% and the

market return is 5%. You are studying UniSUSS stock which has a beta of 1.2. UniSUSS has

just paid a dividend of 1.20 and expects dividends to grow at a rate of 4% per annum for the

next 5 years, and to slow down to 2% growth per annum thereafter.

(a)

Calculate the discount rate you should apply to UniSUSS stock.

(5 marks)

(b)

What is the intrinsic value of UniSUSS stock?

(10 marks)

(c)

If dividends stop growing after the first 5 years, what is the intrinsic value of

UniSUSS stock?

(5 marks)

Question 4

Answer the following questions using Python.

Trunk Company plans to invest in Project A with the following estimated annual cash flows:

Yr 1

Yr 2

Yr 3

Yr 4

Yr 5

$

$

$

$

$

20,000

90,000

180,000

220,000

150,000

The project costs $500,000. The required return for this project is 5% compounded quarterly.

Trunk Company looks at another Project B which might potentially be better than Project A.

Project B has the following cash flows:

Yr 1

Yr 2

Yr 3

Yr 4

Yr 5

$

$

$

$

$

150,000

220,000

180,000

90,000

20,000

This project also costs $500,000. The required return for this project is 5% compounded

quarterly, same as Project A.

(a)

Compute the IRR of Projects A and B, and propose whether to accept or reject each

project, assuming there are unlimited funds. Explain your decision.

(10 marks)

SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS)

Page 3 of 4

FIN201

Tutor-Marked Assignment

(b)

Calculate the NPV of each project. Propose whether to accept or reject each project

based on NPV, and choose one project, assuming the Company has funds only for one

project. Explain your decision.

(10 marks)

(c)

Explain why one of the projects is superior although the cash flows are the same

except that they are received in different years. What should the cost of the inferior

project be in order to make you indifferent to either project?

What is the resulting annual discount rate of the inferior project?

(10 marks)

—- END OF ASSIGNMENT —-

SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS)

Page 4 of 4

Purchase answer to see full

attachment

Order your essay today and save **15%** with the discount code: VACCINE