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# STAT 2032/6046: Financial Mathematics assignment 代写

STAT 2032/6046: Financial Mathematics assignment 代写.

STAT 2032/6046: Financial Mathematics assignment 代写

STAT 2032/6046: Financial Mathematics assignment 代写STAT 2032/6046: Financial Mathematics  Page | 3The first thing you notice about this man’s financial affairs is that it would most likely bebeneficial for him to pay off the mortgage as quickly as possible. This would involve usingthe inheritance immediately and making a lump sum contribution to the home loan, andthen continuing the \$3,000 per month repayments until the loan is paid off. Anyadditional amount of salary not used is credited to the bank account.b) Calculate how much more the man will have at age 65 if he takes thisapproach.(7 Marks)The client mentions to you he is extremely risk averse and does not want to invest inanything where the cash-flows aren’t known in advance. Based on this you decide to onlyrecommend fixed interest securities, with the intention of investigating the impact ofinvesting the inheritance in either of these securities.Two options which you are considering are as follows:Bond A – A zero coupon bond redeemable in 20 years with a gross yield of 6.0% p.a.effective.Bond B – Pays half yearly coupons of 6.0% p.a. Redemption is at the decision of the issuerat the following redemption values:• 1.2 times the face value on any coupon date in the 11 th year through to the 13 thyear from now• 1.3 times the face value on any coupon date in the 14 th year through to the 15 thyear from nowThis bond has a minimum gross yield of 7.5% p.a. effective.c) Assuming the man invests in either Bond A or Bond B (but not both at thesame time); calculate the nominal amount of each bond which can bepurchased using the inheritance amount of \$150,000.(5 marks)STAT 2032/6046: Financial Mathematics  Page | 4Should the client decide to invest in one of the bonds above, you decide to recommendthat the mortgage continue to be paid off with the \$3,000 per month for 7 years. The clientis also subject to a tax of 20% on coupons and capital gains. The tax is payableimmediately it is incurred, with coupons to be invested in the bank account when theyare received. The gross yields of the bonds are unchanged.d) For both bond purchase options, calculate how much money the man willhave in the bank account at age 65. Assume that Bond B is redeemed at theend of the 15 th year.(14 marks)e) Which of the four alternatives discussed above should the man choose suchthat he has the largest bank balance at the age of 65? Give a shortexplanation for your answer.(2 marks)END OF ASSIGNMENT

STAT 2032/6046: Financial Mathematics assignment 代写

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STAT 2032/6046: Financial Mathematics assignment 代写

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