Final Examination — Spring 2012

Student Name

Student Number

Mathematics for Management

CMS2 500

Lecturer:

G. Brown

Date:

Time:

11July 2012

6:00 – 9:00 p.m.

INSTRUCTIONS:

This is a closed book examination.

Mark your answers in the exam booklet.

You are permitted non-electronic translation dictionaries only.

Handheld devices capable of storing text are NOT permitted.

Calculators are permitted.

Only noiseless non-programmable calculators are permitted.

This exam consists of 13 questions printed on both sides with a list of formulae and two tables.

Please ensure that you have a complete examination paper before starting.

Decimal answers should be expressed with 4 digits after the decimal point.

This examination is printed on both sides of the paper.

This examination paper must be returned.

CMS2 500

Final Examination

Spring 2012

Question 1

(8 points) Calculate the annual percentage yield for money invested at 6%:

a) compounded semiannually.

b) compounded monthly.

c) compounded continuously.

Question 2

(8 points) A $150 000 mortgage on a condo in Vieux Montréal is to be repaid over a 15 year period by monthly payments rounded up to the next-higher $100. Interest is 7% compounded semiannually. a) Determine how many rounded payments will be made to repay the mortgage.

b) Determine the size of the last payment.

c) How much interest was saved by rounding payments up to the next-higher $100?

Question 3

(8 points) Our company expects a rate of return of 12% on all projects it undertakes. We must choose between Project A and Project B (we don’t have sufficient resources to do both projects).

The timescale for both projects is 10 years.

Project A requires an immediate investment of $1 000 000 and will produce two revenue payments: $1 250 000 at the end of the 5th year and $2 000 000 at the end of the 10th year

Project B requires an immediate investment of $750 000, an investment of $500 000 in five years and will