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Semester “Fall 2011”

 

“Money & Banking (MGT411)” 

This is to inform that next Assignment (covering video lecture no. 01 to lecture no. 09)

will be uploaded on VULMS according to the following schedule

 

Schedule

Opening Date and Time

October 21, 2011 At 12:01 A.M. (Mid-Night)

Closing Date and Time

October 28, 2011 At 11:59 P.M. (Mid-Night)

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I need hlp tooo

Solution:

 

Q#1: Considering the fact that the house prices will grow at the rate of 4% per annum, what will be the future house price of the house Mr. Naeem intends to buy after 8 years.

 

            FV = PV (1+i )n

            FV = 1,500,000 (1+0.04)8

            FV = 1,500,000 (1.04)8

            FV = 1,500,000 (1.3685)

            FV = Rs. 2,052,853/-

 

Q#2: Based on the answer from Q#1(FV), how much amount Mr. Naeem should invest today (which earns 9% rate of return) so that he may be able to purchase his house after 8 years.

 

            2,052,853 = PV (1+0.09)8

            2,052,853 = PV (1.09)8

            2,052,853 = PV (1.9925)

            PV = 2,052,853 / 1.9925

PV = Rs. 1,030,290/-

 

Q#3: Assume the house prices appreciate at the rate of 6% per annum instead of 4% then how much he should invest today in order to be able to purchase the house after 8 years.

 

            FV = 1,500,000 (1.06)8

            FV = 1,500,000 (1.5938)

            FV = Rs. 2,390,772/-

 

            2,390,772 = PV (1.09)8

            2,390,772 = PV (1.9925)

            PV = 2,390,772 / 1.9925

            PV = Rs. 1,199,885/-

 

Q#4: If Mr. Naeem decides to deposit in less risky certificate of deposits earning only 5% p.a. then how much funds he has to deposit in his bank to be able to purchase the house after 8 years.

 

            2,052,853 = PV (1.05)8

            2,052,853 = PV (1.4775)

            PV = 2,052,853 / 1.4775

            PV = Rs. 1,389,409/-

 

Q#5: If Mr. Naeem decides to invest in more risky growth stocks earning 12% rate of return then how much funds he has to invest to purchase his house after eight years.

            2,052,853 = PV (1.12)8

            2,052,853 = PV (2.4759)

            PV = 2,052,853 / 2.4759

PV = Rs. 829,137/-

 

hi dears,

i think in the 1st question answer you took 1500000 but if you will read the question you will find it should be 2400000 which is current price of the house which he intend to buy. 

please clarify this.

koi tu solution likhay

:(

hint for money and banking

see lecture 8 and 9

 

Semester “Fall 2010” 
“Money & Banking (MGT411)” 
Assignment No. 01 Marks: 20 
Mr. Naeem is working as a finance manager at Superior Textile Mills Limited, 
after completing his MBA (Finance) from Virtual University of Pakistan. 
Recently, he got married and shifted his family in a rented house near the 
office. Paying monthly rent is a painful experience and in this way he cannot 
save much for his future needs. Therefore, he is planning to purchase his own 
house for avoiding monthly rental expense. For this purpose he is expecting to 
sell share in his native house for Rs. 1,500,000/- which is not a sufficient 
amount to buy house in a big city. After considering various areas in 
Faisalabad city, he chose Model Town for his desired future residency. Based 
on the house prices data in that area, he learned that an average two bed room 
house currently costs Rs.2,400,000/-. So he has to set aside some funds for the 
next eight years so that he may be able to purchase his own house after having 
sufficient funds. 
As Mr. Naeem is planning to purchase the house after eight years, so it is 
quite clear that the prices of the houses will not remain the same overtime. In 
order to estimate the rate at which the house price will increase he considered 
the historical price appreciation data in that area and resulted that house prices 
appreciated at the rate of 4% per annum. 
Mr. Naeem is planning to invest the funds that will be devoted for purchasing 
the house, in a portfolio of investment. He feels that this investment portfolio 
containing stocks, bonds and govt. securities will give him the rate of return of 
9% p.a. 
Required: (4 marks each) 
Q#1: Considering the fact that the house prices will grow at the rate of 
4% per annum, what will be the future house price of the house Mr. 
Naeem intends to buy after 8 years. 
Q#2: Based on the answer from Q#1(FV), how much amount Mr. 
Naeem should invest today (which earns 9% rate of return) so that he 
may be able to purchase his house after 8 years. 
Q#3: Assume the house prices appreciate at the rate of 6% per annum 
instead of 4% then how much he should invest today in order to be able 


to purchase the house after 8 years. 
Q#4: If Mr. Naeem decides to deposit in less risky certificate of deposits 
earning only 5% p.a. then how much funds he has to deposit in his bank 
to be able to purchase the house after 8 years. 
Q#5: If Mr. Naeem decides to invest in more risky growth stocks 
earning 12% rate of return then how much funds he has to invest to 
purchase his house after eight years.

Semester “Fall 2011” 
“Money & Banking (MGT411)” 
Assignment No. 01 Marks: 20 
Mr. Naeem is working as a finance manager at Superior Textile Mills Limited, 
after completing his MBA (Finance) from Virtual University of Pakistan. 
Recently, he got married and shifted his family in a rented house near the 
office. Paying monthly rent is a painful experience and in this way he cannot 
save much for his future needs. Therefore, he is planning to purchase his own 
house for avoiding monthly rental expense. For this purpose he is expecting to 
sell share in his native house for Rs. 1,500,000/- which is not a sufficient 
amount to buy house in a big city. After considering various areas in 
Faisalabad city, he chose Model Town for his desired future residency. Based 
on the house prices data in that area, he learned that an average two bed room 
house currently costs Rs.2,400,000/-. So he has to set aside some funds for the 
next eight years so that he may be able to purchase his own house after having 
sufficient funds. 
As Mr. Naeem is planning to purchase the house after eight years, so it is 
quite clear that the prices of the houses will not remain the same overtime. In 
order to estimate the rate at which the house price will increase he considered 
the historical price appreciation data in that area and resulted that house prices 
appreciated at the rate of 4% per annum. 
Mr. Naeem is planning to invest the funds that will be devoted for purchasing 
the house, in a portfolio of investment. He feels that this investment portfolio 
containing stocks, bonds and govt. securities will give him the rate of return of 
9% p.a. 
Required: (4 marks each) 
Q#1: Considering the fact that the house prices will grow at the rate of 
4% per annum, what will be the future house price of the house Mr. 
Naeem intends to buy after 8 years. 
Q#2: Based on the answer from Q#1(FV), how much amount Mr. 
Naeem should invest today (which earns 9% rate of return) so that he 
may be able to purchase his house after 8 years. 
Q#3: Assume the house prices appreciate at the rate of 6% per annum 
instead of 4% then how much he should invest today in order to be able 


to purchase the house after 8 years. 
Q#4: If Mr. Naeem decides to deposit in less risky certificate of deposits 
earning only 5% p.a. then how much funds he has to deposit in his bank 
to be able to purchase the house after 8 years. 
Q#5: If Mr. Naeem decides to invest in more risky growth stocks 
earning 12% rate of return then how much funds he has to invest to 
purchase his house after eight years.

See the attached file 

Attachments:

Bhai ye to mujhe kuch samajh nhi aa rahi PV n FV nhi leni thi kia house ki?? in formulas ka to nhi pata mujhe :(

See the attached file for MGT411 Assignment#01 Complete Solution

Attachments:

Tariq Sb I think that PV is 2400000 instead of 1500000 because 1500000 is his share from native house and 2400000 is the price of house that he wants to purchase after eight year.  The estimated value of house is 2400000.  Pls reply

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