02 May QuestionBusiness Mathematic
Question
Business Mathematics
Question 1:
a. You have recently purchased a 5-room resale HDB flat in Bishan at a transaction price of $700,000. the combined balance of CPF Ordinary Account for both you and your spouse is $200,000. You intend to use the CPF balance for the upfront payment, and use a bank loan for the remaining $500,000 with monthly installment for the next 20 years of tenureship. with so many loan packages offered by different banks in the market, you prefer to adopt a more ‘conservative’ approach in your future assessment and decided to take up a fixed-rate package of 2.0% p.a. compounded monthly.
Construct a loan amortization schedule using Microsoft Excel and snip your answer table showing first and last 6 months of payment schedule. [Please show formulas used and your workings.]
(7 marks)
b. You have an existing housing loan with an outstanding amount of $500,000. you would like to refinance this loan for a term of 20 years. Make a study of the offers from DBS Singapore and OCBC Singapore (consider both fixed and floating rates). Show clearly how you would compare the offers and decide on the best package. [Please reference the website links to show the interest rate used for each bank.]
(8 marks)
Question 2:
A firm is planning to introduce a new product and has called for bids for the construction of the plant to manufacture the product. The cash flows predicted for the two bids under consideration are given below.
| Cash Flow | ||
| Year | Plant A | Plant B |
| 0 | -90,000 | -50,000 |
| 1 | 45,000 | 30,000 |
| 2 | 55,000 | 37,000 |
| 3 | 50,000 | 28,000 |
Using the net present value (NPV) approach, with an interest rate of 7% p.a., which plant should the company choose? [Please show formulas used and your workings.]
(10 marks)
Question 3:
a) For a loan of $55,000, with an annual interest rate of 5% p.a. compounded monthly, and monthly repayments of $1.100. Find the number of payments required to repay the loan. How many years is this? [Please show formulas used and your workings.]
(5 marks)
b) CompuSystems was supposed to pay a manufacturer $19,000 on a date 4 months ago. CompuSystems is proposing to pay $10,000 today and the balance in 5 months, when it will receive payment on a major sale to the government. Assuming that the manufacturer requires 18% per year compounded monthly on overdue accounts. what should the second payment be. [Please show formulas used and your workings.]
(10 marks)
Question 4:
Briefly describe the Global Financial Crisis in 2008 and discuss in what ways asymmetry information played a role in the crises. Keep your answer within 350 words.
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