Take Home Quiz

Take Home Quiz 11. Today is 1 July 2019. John is 30 years old today. He is planning to purchasean apartment with the price of $800,000 on 1 January 2024. John believes that, atthe time of purchasing the house, he should have savings to cover 20% of the houseprice (i.e., $160,000) on 1 January 2024.John has a portfolio which consists of two Treasury bonds and a bank bill (hence-forth referred to as bondA, bondBand bank billC). There are 200 units of bondA,300 units of bondBand 400 units of bank billC. (35 marks)a. [12 marks]•BondAis a Treasury bond which matures on 1 July 2030. One unit ofbondAhas a coupon rate ofj2= 3.95% p.a. and a face value of $100.John purchased this Treasury bond on 15 February 2017. The purchaseyield rate wasj2= 3.85% p.a.•BondBis a Treasury bond which matures on 1 January 2026. One unitof bondBhas a coupon rate ofj2= 3.7% p.a. and a face value of $100.John purchased this Treasury bond on 1 July 2016. The purchase yieldrate wasj2= 4.1% p.a.•Bank billCis a 180-day bank bill which matures on 1 September 2019.One unit of bank billChas a face value of $100. John purchased thisbank bill on 15 April 2019. The purchase yield rate was 3.05% p.a.(simple interest rate).Calculate•The purchase price of one unit of bondA•The purchase price of one unit of bondB•The purchase price of one unit of bank billCRound your answer to three decimal places. The price of both bondAandBshould be calculated by using the RBA method. You should refer to week 3’smaterials for this RBA method.1ACST201Financial ModellingTake Home Quiz 1 S2 2019
b. [8 marks] John decides to sell each of the three security types today. Both thebonds are sold at a yield rate ofj2= 3.2% p.a. and the bank bill is sold at 3%p.a. (simple interest rate).Calculate•The sale price of one unit of bondA•The sale price of one unit of bondB•The sale price of one unit of bank billCRound your answer to three decimal places. Then calculate the total sale priceof the portfolio (round your answer to the nearest dollar). Note that the saleof each bond occurs after a coupon payment.c. [4 marks] John plans to use $80,000 of the sale proceeds calculated in part bto invest into a fund today. John predicts that the return rate of this fundwill be1 July 2019 to 30 June 2021j2= 5.1%1 July 2021 to 31 December 2023j2= 5.3%Calculate the accumulated value of John’s fund investment on 1 January 2024(round your answer to four decimal places.).d. [6 marks] To save for remaining required amount on 1 January 2024 (thedifference between the 20% of the house price and the accumulated value frompart c), John plans to depositz% of his annual after-tax salary into a savingaccount on 1 July of each year from 2019 to 2023 (5 deposits in total). Thesaving account rates are assumed to be 0.2% per month. Assume that John’safter-tax salary is $90,000 p.a. Find the value ofz(expressed as a percentageand rounded to two decimal places).e. [5 marks] From John’s perspective, draw a carefully labelled cash flow diagramto represent the above financial transactions of parts c and d.End2ACST201Financial ModellingTake Home Quiz 1 S2 2019
The submission deadline of Take Home Quiz 1 submission part isAugust 202018, 9:00AM. You need to submit your solutions (in onePDFfile) to the linkon iLearn to complete the submission part of this assessment. It can be typed orhandwritten and scanned. You need to show the working steps in your solution.Please refer to the Assessment submission guide on iLearn for further submissiondetails. Please note that uploading a file can take up to 15 minutes. You needto submit your file at least 20 minutes before the deadline to ensure a successfulsubmission.3ACST201Financial ModellingTake Home Quiz 1 S2 2019