A Guide to Business Mathematics 1st. Edition by Gerard O'Regan | 9781032311166 | 1032311169 | Holooly

A Guide to Business Mathematics

106 SOLVED PROBLEMS

Question: 7.9

Suppose an investor purchases a 5-year €10,000 bond when it is issued on January 1, 2020 at a coupon rate of 6% with interest paid bi-annually, and the market rate of interest is 4%. Determine the value of the bond on July 1, 2023. ...

Verified Answer:

The value of the bond is determined from the prese...

Question: 7.8

Suppose an investor purchases a 5-year €10,000 bond when it is issued on January 1, 2020 at a coupon rate of 6% with interest paid bi-annually, and the market rate of interest is 4%. Determine the present value of the bond on January 1, 2020. ...

Verified Answer:

The present value of the bond is determined from t...

Question: 7.4

Joanne has taken out a €200,000 mortgage over 20 years at 8% per annum. Calculate her repayment amount per annum to amortize the mortgage. ...

Verified Answer:

We apply the formula to calculate her annual repay...

Question: 7.7

A borrower is paying €1200 monthly on a 20-year mortgage where the interest rate is 4% compounded monthly. Determine the following: 1. The principal borrowed 2. The principal amount outstanding at the start of year 20. ...

Verified Answer:

The number of payment periods is 20 ∗ 12 = 240 and...

Question: 7.6

For the previous example, determine the following at the end of the first period: 1. The amount of interest repaid 2. The amount of the principal repaid 3. The amount of the principal outstanding. ...

Verified Answer:

The amount paid at the end of the first period is ...

Question: 7.5

A mortgage of £150,000 at 6% compounded monthly is amortized over 20 years. Determine the following: 1. Repayment amount per month 2. Total amount paid to amortize the loan 3. The cost of financing. ...

Verified Answer:

The number of payments n = #years ∗ payments per y...

Question: 11.2

Suppose the policy for the car pool of 100 cars that was discussed has a €500 excess. Calculate the expected claims payment and the insurer’s risk. ...

Verified Answer:

The claim payment distribution is determined from ...

Question: 11.1

Suppose that a car owner has an 80% probability of zero accidents in the year, a 20% probability of one accident and a zero probability of being in more than one accident in a year. If an accident does occur, then there is a 50% probability that the repairs will cost €500, a 40% probability that ...

Verified Answer:

The overall loss distribution L(x) is determined f...

Question: 10.9

A new machine has been introduced and management is questioning whether it is more productive than the previous one. Management takes 15 samples of this week’s hourly output to test whether it is less productive, and the average production per hour is 1250 items with a standard deviation of 50. The ...

Verified Answer:

The sample mean is 1250, the population mean is 12...

Question: 10.8

Suppose three faulty components are identified in a random sample of 20 products taken from a production line. What statement can be made about the defect rate of all finished products? ...

Verified Answer:

The proportion of defective products in the sample...

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