1FM101 Financial MathematicsSemester 1 2016Individual Assignment (10%)1. Due Date: Wednesday 4th May in the Lecture. Penalty at 10% per day.2. Must be word-processed, not hand written, word size 12 with 'Times new roman' font type and double-spacing.3. Each answer must be clearly marked by the designated question to which it corresponds.4. Please list any references (books, articles, web-based material) you use at the end of your assignment in alphabetical order, using the referencing style seen in academic articles (i.e. with in text references and bibliography, as in the Harvard referencing style).5. Also upload the softcopy of the assignment on Moodle.IMPORTANT INSTRUCTIONIn the questions below, the interest rates are given as X%. This X% is the sum of the first and last digit of your student ID. For example, if your Student ID is S90056911 then the interest rate that you will use in answering the questions is 9 + 1 = 10%.The interest percentage which you use should be written on the Cover Page of the assignmentQuestion 1 (10 marks)Every 2 years Mrs Taliga deposits $2000 into a fund that pays interest at j2 = X% p.a. The first deposit is one her 53rd birthday and the last deposit is on her 65th birthday. Beginning 3 months after her 65th birthday and counting every 3 months thereafter, she withdraws equal amounts of $A, which will exactly exhaust the fund on her 79th birthday. Determine $A.Question 2 (10 marks)You take out an $80,000 mortgage at j2 = X% p.a. with a 25 year amortisation period.a. Determine the monthly payment required, rounded to 2 decimal places.b. Determine the reduced final paymentc. Determine the total interest paid during the 4th year.d. At the end of4 years, you pay down an additional $2500 (no penalty), How sooner will themortgage be paid off?2Question 3 (10 marks)A superannuation fund can earn j1 = X% p.a. with investments in government securities. Determine which of the following investments the fund should accept if the initial investment required is $100,000 in each case.End of year net cash flowProjectYear 1Year 2Year 3Year 4YearL2500025000250002500025000M1000030000400003000010000N-8000040000500006000070000O7000050000300000-30000Question 4 (10 marks)The MKS corporation issues a $1000 bond with coupons at j2 = 8% and redeemable at par on 1 August 2027.a. How much should be paid for this bond on 1 February 2012 to yield j2 = X%b. If the purchase price was $1050 and the bond is held to maturity determine the overall yield, j2.Question 5 (10 marks)Mrs. Tong makes semi-annual deposits into a fund earning interest at j2 = 8% p.a. Her first deposit is $2500 and each succeeding deposit is 6% higher than preceding deposit. What is the accumulated value of her fund immediately after her 15th deposit?