THE UNIVERSITY OF AUCKLAND新西兰assignment代写Department of Accounting and Finance

FIN251 Financial Management S2 - 2011

Assignment One:

Due Date: 4 pm, Friday, 12 August 2011

This assignment accounts for 10% of your overall course mark. It should demonstrate your individual work. Although you are free to discuss the questions with other students in general terms, the final answer and write up should be your own. Copying is not permitted and is considered cheating.

Answer all four questions and show all working. Answers to your assignment must be typed.

Please hand in your assignment at the Assignment Centre on Level 0, OGG Building with the Department of Accounting & Finance cover sheet attached.

Question 1

Mr. Litview Comliq has just celebrated his 60th birthday on 31 July 2011. It is also the day he is promoted to CEO of Success Quest Ltd. He has a saving account that he deposits $1,500 a month at the beginning of each month. He opened this account on his 25th birthday. During these 35 years of saving, he has been able to earn a constant annual interest of 4% (compounded monthly). It is now time for him to check out his savings and plan for the future.

(a) How much money has Mr. Comliq saved over the past 35 years when he checks his savings account on his 60th birthday?

(3 marks)

(b) Mr. Comliq wants to have a total of $2 million on his 65th birthday. He thinks his increased salary will help him to achieve that goal in the next 5 years. How much money will Mr. Comliq need to contribute at the beginning of every month for the next 5 years so that his total savings will reach the $2 million mark? Assume that he could earn an annual return of 5% (monthly compounded) on his savings in the next 5 years.

(4 marks)

(c) How much can Mr. Comliq withdraw per year to enjoy his life after retirement if he plans to spend all the money in his savings in 10 years? Note that he retires after he celebrates his 65th birthday and wants to withdraw the money at the end of each year. Assume he could earn 5% interest (annually compounded) per year during these 10 years.

(3 marks)

NB. Ignore tax and assume all numbers are in real terms. Do NOT change to a nominal analysis by incorporating expected inflation into your workings.

Question 2

In 2010, the New Zealand government issued government bonds with a face value of $1,000. The bonds mature in 15 March 2019 and have an annual coupon rate of 5% (paid semi-annually).

(a) Assuming today is 15 March 2011, how much is a government bond worth if the bond’s yield to maturity (YTM) is 5.5%? Note the coupon payment on 15 March 2011 should not be included in your calculation.

(3 marks)

(b) Assume that ANZ purchases this bond for the price in part (a) and intends to hold it for 4 years, i.e. until 15 March 2015. Also, assume that the bond’s YTM suddenly drops down to 4.5% immediately after ANZ’s purchase and remains at that level during its holding period. After that the yield jumps back up to 6% for the remaining 4 years of the bond. What is the bond price when ANZ sells it to another institutional investor? What is the annual rate of return for ANZ and why it is different from the 5.5% YTM in part (a)?(51Due责任编辑：BUG)