Problem Questions (10 marks
each, totaling 30 marks):
41. Two years ago you purchased a new
SUV. You financed your SUV for 60 months (with payments made at the end of the
month) with a loan at 5.9% APR. Your
monthly payments are $617.16 and you have just made your 24th monthly payment
on your SUV.
Required:
Assuming that you have made all of the first 24 payments on time, how much
interest have you paid over the first two years of your loan? (10 marks)
42. Consider the following list of
projects:
|
Project |
Investment |
NPV |
|
A |
405,000 |
18,000 |
|
B |
600,000 |
90,000 |
|
C |
375,000 |
60,000 |
|
D |
450,000 |
6,000 |
|
E |
525,000 |
30,000 |
|
F |
225,000 |
30,000 |
|
G |
240,000 |
27,000 |
|
H |
600,000 |
60,000 |
|
I |
150,000 |
12,000 |
|
J |
270,000 |
30,000 |
You
are given a budget of only $1,800,000 to invest in projects.
Required:
Which projects will you select, in what order will you select them, and why?
(10 marks)
43. Consider the following three
individuals’ portfolios consisting of investments in four stocks:
|
Stock |
Beta |
Peter’s Investment |
Paul’s Investment |
Mary’s Investment |
|
Eenie |
1.3 |
2,500 |
5,000 |
10,000 |
|
Meenie |
1.0 |
2,500 |
5,000 |
10,000 |
|
Minie |
0.8 |
2,500 |
5,000 |
-5,000 |
|
Moe |
-0.5 |
2,500 |
-5,000 |
-5,000 |
Required:
Assuming that the risk-free rate is 4% and the expected return on the market is
12%, then calculate the required return on Mary’s portfolio. (10 marks)
