Today is 1 January 2018. Mary is 40 years old today and she is planning to set up a university education fund for her 12 year old daughter Emily. The fund should be enough to cover Emily’s university tuition fee costs .

a. Assume that Emily will attend university at age 18 to complete a three-year bachelor degree. Mary estimates that current average university tuition fees are $25,000 per person per year and are growing at a rate of 3% p.a. (e.g., the estimated tuition fee for 2019 is $25, 000 × (1 + 3%)). Find Emily’s first year, second and third year tuition fee amount. Calculate the amount that Mary needs to deposit into the fund today. Assume the fund yield rate is j1 = 3.6% p.a. and the tuition fee is paid on an annual basis at the beginning of each study year. Round your answer to three decimal places.

b. Mary has a portfolio which consists of three securities (henceforth referred to as security A, security B and security C).

• Security A is a 180-day $50,000 bank bill which is purchased on its issue date 15 November 2017. The purchase yield rate is 4.1% p.a. (simple interest rate).

• Security B is a Treasury bond which matures on 1 January 2025. This Treasury bond has a coupon rate of j2 = 3.25% p.a. and a face value of $100. Mary purchased this Treasury bond on 23 September 2017. The purchase yield rate was j2 = 3.7% p.a.

• Security C is a Treasury bond which matures on 1 January 2023. This Treasury bond has a coupon rate of j2 = 4.75% p.a. and a face value of $100. Mary purchased this treasury bond on 28 December 2016. The purchase yield rate was j2 = 4.1% p.a. Calculate the purchase price of security A, security B and security C. Round your answer to three decimal places. The price of both security B and security C should be calculated using the RBA method.

c. Mary decides to sell all three securities today to pay the required deposit for the education fund. Security A can be sold at a yield rate of 3.9% p.a. (simple interest rate). Security B and security C can be sold at a yield rate of j2 = 3.75% p.a. Calculate the sale price of security A, security B and 1 ACST201 Financial Modelling Take Home Quiz 1 S1 2018 security C. Round your answer to three decimal places. Note that the sale of security B and security C occurs after the coupon payment.

d. Based on Mary’s perspective, draw three carefully labelled cash flow diagrams to represent the above financial transactions of security A, security B and security C, respectively.

Q4) The following yields were recorded by using two agricultural products.

Perform a two sample hypothesis test to consider if the yields for product A and product B are different. Use the default significance level of α=0.05.

You may assume that the population variances for product A and B are equal.

You should take the mean of Yield A first in your test statistic.

1. State the Null and Alternative hypotheses.

2. Calculate the test-statistic.    (state accurate to 2dp)

3. State the Degrees of Freedom.

(1 Mark)

4. Look up the upper-tail critical value from tables.

(1 Mark)

5. State your decision regarding H_o.

Q5) 184 patients with coronavirus have been hospitalised in the city hospital. 92 have been treated with anti-viral medication and 92 have not.  

Perform a hypothesis test to determine if there is an association between patients being given anti-viral drugs and developing pneumonia. Use a 5% level of significance.

The Observed frequencies are presented in the table below.

1. Calculate the four expected values under the condition of the Null hypothesis.

2. Calculate the two missing χ² contributions to the test-statistic.

                                                                                       (state accurate to 4dp)

3. Calculate the test statistic, χ²  (state accurate to 2dp).

(1 mark)

4. Look up the critical value from tables and state its value.

(1 mark)

5. State your decision to reject or not reject H_o and confirm or deny whether there is a relationship between drug treatment and pneumonia.

Q6) A sample of the various prices for a particular product has been conducted in 16 stores which were selected at random in a city. The following prices were noted, in GBP:

95, 108, 97, 112, 99, 106, 105, 100, 99, 98, 104, 110, 107, 111, 103, 110.

1. Calculate a 95% confidence interval to estimate the actual mean price of the product in the city. State the interval accurate to 1 decimal place.                                                                                                

2. Is it reasonable to assume that the average price for this product is £100? State your reasoning.                                                                                                                      

3. What size sample would need to be taken to estimate the population mean price within 1 pound?                                                                                                                    

onsider the following matrix

Which of the following statements is true regarding the players' secure strategies?

Group of answer choices

Both firms have a secure strategy to play low price.

Neither firm has a secure strategy to play low price.

Only Firm A has a secure strategy to play low price.

Only Firm B has a secure strategy to play low price.

Calculate three step Binomial tree call option price please.

Stock price = 124.2862, Strike price = 120, Volatility = 20%, Interest rate= 0.15%, Days to expiration = 247 days / 365 days Thank you so much

Utilise the following information. Call option price $5 with strike price $60, put option price $4 with strike price $55. They both expire 90 days from now and are written on the same stock. A client believes the stock price could move substantially in either direction in reaction to an expected court decision involving the company. The client currently owns no stocks.

⦁ Draw the profit and loss graph of long strangle

⦁ Draw the profit and loss graph of short strangle

⦁ What is your advice about implementing a strangle strategy, i.e., choosing a long or a short strangle, to capitalize on the possible stock price movement. (1 mark)

⦁ At expiration, for the appropriate strangle strategy, what is the maximum possible loss per unit of strategy? (1 mark)

⦁ At expiration, for the appropriate strangle strategy, what is the maximum possible gain per unit of strategy? (1 mark)

⦁ What are the break-even stock prices?

When Da Vinci's first airplane model was sold at auction in 1895, it went for $230. In 2016, the original owner sold the paininting again and this time Sotheby's auctioneers were able to sell it for the staggering sum of $1,450,000.

a. What was the annual percentage increase in price of the painting over this period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

b. How much money should the painting be worth in 2030 if the price of the painting increases at the same rate as (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Suppose there is a 3-year bond with a $1000 face value, 12% coupon payments and a 6% yield to maturity.

a) Without any calculation, briefly explain whether this bond will be selling a premium or a discount.

b) Calculate the price of this bond.

c) Calculate the duration of this bond.

d) If someone buys this bond and holds it for three years, what is their rate of return?

e) Suppose after one year, interest rates in the economy fall by 2%. If the person that bought this bond sells it at that time, what would be their rate of return? (Hint: First think about what the fall in interest rates will do to the bond’s price and then think about the rate of return.)

Very Busy Airlines has the following capital structure: Debt           $50,000,000 Preferred Stock       $10,000,000 Common Stock       $40,000,000 Additional info: Yield to maturity (bonds)   10% Price of preferred stock       $55 Price of common stock       $30 Preferred dividend       $10 Common dividend       $3 Flotation cost, preferred       $5 Growth rate of dividends   5% The firm’s tax rate is 40%. Compute the firm’s weighted average cost of capital [WACC]. (10) [Hint: First compute weights for debt, preferred stock, and common stock in the capital structure. Then compute their respective component costs. Finally compute the WACC].

Please show me how to do this by using excel and its functions

Mrs. Dawn Chorus, founder and president of United Bird Seed, is wondering whether the company should make its first public sale of common stock and, if so, at what price.

The company’s financial plan suggests rapid growth over the next three years but only moderate growth afterwards. Forecasted dividends per share are as follows:

Year                1                      2                      3                      4                      5

                       $1.00            $1.20             $1.44           5% growth thereafter

Investors demand a return of 10%.

Calculate the price of United Bird Seed’s stock (today).