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    Applied Corporate Finance Assignment No. 2: C O B A M O B A (M) S F 2021-2022

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    Hamda alzarooni
    This document contains an assignment submitted by a student named Hamda Abdulrahman Mohamed Haway Al Zarooni for their Applied Corporate Finance class. The assignment contains 5 questions calculating things like future and present value of investments, loan payments, and interest amounts over time. For question 3, the student calculates that with a 6% annual interest rate, the future value of receiving AED 15,000 every 2 years for 20 years is AED 267856.25.

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    Applied Corporate Finance Assignment No. 2: C O B A M O B A (M) S F 2021-2022

    Uploaded by

    Hamda alzarooni
    29 views4 pages
    This document contains an assignment submitted by a student named Hamda Abdulrahman Mohamed Haway Al Zarooni for their Applied Corporate Finance class. The assignment contains 5 questions calculating things like future and present value of investments, loan payments, and interest amounts over time. For question 3, the student calculates that with a 6% annual interest rate, the future value of receiving AED 15,000 every 2 years for 20 years is AED 267856.25.

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    Assiggment 2

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    This document contains an assignment submitted by a student named Hamda Abdulrahman Mohamed Haway Al Zarooni for their Applied Corporate Finance class. The assignment contains 5 questions calculating things like future and present value of investments, loan payments, and interest amounts over time. For question 3, the student calculates that with a 6% annual interest rate, the future value of receiving AED 15,000 every 2 years for 20 years is AED 267856.25.

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    29 views4 pages

    Applied Corporate Finance Assignment No. 2: C O B A M O B A (M) S F 2021-2022

    Uploaded by

    Hamda alzarooni
    This document contains an assignment submitted by a student named Hamda Abdulrahman Mohamed Haway Al Zarooni for their Applied Corporate Finance class. The assignment contains 5 questions calculating things like future and present value of investments, loan payments, and interest amounts over time. For question 3, the student calculates that with a 6% annual interest rate, the future value of receiving AED 15,000 every 2 years for 20 years is AED 267856.25.

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    COLLEGE OF BUSINESS ADMINISTRATION

    MASTER OF BUSINESS ADMINISTRATION (MBA)


    SEMESTER FALL 2021-2022

    Applied Corporate Finance


    Assignment No. 2

    Student Name:
    Hamda Abdulrahman Mohamed Haway Al Zarooni
    Student ID:
    U20102391
    1. Hamad will receive the following payments at the end of the next five years: AED 90,000, AED
    80,000, and AED 95,000, AED 82,000 and AED 90,000. If Hamad’s bank pays an annual interest rate of
    6 percent, what is the future value of the five payments?

    FV=C x (1+r) n = 90,000 x (1+0.06)5-1 = 113,622.93

    FV=C x (1+r) n = 80,000 x (1+0.06)5-2 = 95,281.28

    FV=C x (1+r) n = 95,000 x (1+0.06)5-3 = 106,742

    FV=C x (1+r) n = 82,000 x (1+0.06)5-4 = 86,920

    FV=C x (1+r) n = 90,000 x (1+0.06)5-5 = 90,000

    FV= 492,566.21

    2. The parents of Hala saved an amount of AED 20,000 to cover her university costs and expected to
    grow 5 percent per year. The saving amount will be invested in an account paying 8% interest, what is
    the amount of money she will need to have available at age 18 to pay for all four years of her
    undergraduate education

    1   1  g  
    N

    PV  C  1    
    (r  g )   (1  r )  

    PV= 20000 x 1/ (0.08-0.05) x (1-((1+0.05)/(1+0.08) 18)

    PV = 265163.92

    Hala parents will have 265163.92 AED today in the bank

    FV = 265163.92 x / (1+0.08)18

    PV = 20000x 1/ (0.08-0.05) x (1-((1+0.05)/(1+0.08)) 18)


    PV = 265163.91
    Hala’s parents saving plan is equivalent to having 265163.91 in the bank today

    FV= 265163.91x (1+0.08) 18


    FV = 1059600.18
    When Hala turns 18, her parents will save 1059600.18 AED for 4-year University

    Hala’s parents will save 1059600.18 when Hala turns 18

    Cost of the first year in 2020 = 20,000 x (1 + 0.05)18 = 48,132.38


    Cost of the second year = 48,132.38 x (1 + 0.05) = 50,539
    Cost of the third year = 50,539 x 1.05 = 53,065.95
    Cost of the fourth year = 53,065.95 x 1.05 = 55,719.25

    If the account earns 8% annually, the value of that account in 2020 should be

    Year 1= 48,132.38
    Year 2= 50,539 / 1.08= 46795.37
    Year 3= 53,065.95/ 1.082 =45495.50
    Year 4= 55,719.25/ 1.083 = 44231.73

    Total = 48,132.38 + 46795.37 + 45495.50 + 44231.73= 140,423.25

    1059600.18 - 140,423.25 = 919176.93

    3. If the current rate of interest is 6% APR, what is the future value of an investment that pays AED
    15,000 every two years and lasts 20 years.

    The Amount is received every two years.

    2 Year Rate = [(1+0.06)^2-1] = 12.36%

    1 payment every 2 year during 20 Year, total of 10 Payments

    I = 12.36%

    N = 10

    FV = 15,000 x ((1+0.1236)10 -1)/ (0.1236))

    FV = AED 267856.25

    4. You are considering purchasing a new home. You will need to borrow AED 4,000,000 to purchase
    the home. A mortgage company offers you a 10-year fixed rate mortgage at 12% APR. If you borrow
    the money from this mortgage company, what is your monthly mortgage payment

    PV = loan amount = 4,000,000

    r = monthly rate= 12/12 = 1%

    n = months = 120

    C = monthly payment

    4,000,000 = C / 0.01 x (1 - (1 / (1+ 0.01) 120)

    40,000= C * (1-(1/1.01)120

    40,000 = C * 0.6970

    C = 57,388.81
    Monthly payment = 57,388.81

    5. Amira has borrowed AED 3,000,000 from Al-Mashreq Bank The annual interest rate on this loan is 8
    percent and the loan is to be repaid over five years with equal payments at the end of each year.
    What will be the interest and principal portions of the payments for year 3 and What will be the total
    interest payments over the five years?

    Annual payment at the end each year for five years.

    A = P (r (1+r) n) / ( (1+r)n -1 )

    A=3000000 x (0.08(1+0.08)5/ ((1+0.08)5-1)

    A = 751,369.36

    Annual Loan payment = AED 751,369.36

    Principle Loan outstanding


    Beginning of Annual Loan Interest Amount
    Year Repayment at the end of
    the loan (LB) Payment (AP) I= LBx0.08
    PR = AP-I each year (LP-PR)
    1 3000000 751,369.36 240000.00 511,369.36 2,488,630.64

    2 2,488,630.64 751,369.36 199090.45 552,278.91 1,936,351.73

    3 1,936,351.73 751,369.36 154908.14 596,461.22 1,339,890.51

    4 1,339,890.51 751,369.36 107191.24 644,178.12 695,712.39

    5 695,712.39 751,369.36 55656.99 695,712.37 0.02

    Total Interest 756846.82

    The interest and principal portions of the payments for year 3

    Interest Year 3 = 154908.14

    Principal portions year 3 = 596,461.22

    Total Interest= 756846.82

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