Website: https://fmworldcup.com/sample-cases/
Link of Sample Case: https://fmworldcup.com/wp-content/uploads/2021/01/Speed-It-Up-Finance-Task-Only.zip
My answers are shared below, welcome for discussion,
Speed It Up (Finance)
(350 points available)
QUESTIONS
1. A financial analyst is planning to move to a new house and to take a mortgage to buy it. The house costs $1,000,000. The bank offers a mortgage on the following conditions:
i. At least 10% downpayment (i.e., $100,000 should be paid by the analyst upfront and the loan amount will then be $900,000)
ii. 1.9% annual interest rate (assume 30/360 convention, i.e., the monthly interest rate is equal to 1/12 of annual interest rate)
iii. 40-year term with monthly repayments
iv. Annuity repayment schedule (i.e., equal monthly payments)
v. The monthly payment should be no more than 30% of the analyst’s monthly salary
In addition to having the required savings for the downpayment, what is the minimum
annual salary the analyst should earn to afford the house? Disregard bonuses - assume that
annual salary is equal to 12 monthly salaries – 50 Points
a. $96,419
b. $106,826
c. $106,963
d. $107,132
e. $109,185
f. $110,745
[Function used for this Question: IPMT and PPMT]
2. After moving into the new house, the analyst signs a 3-year agreement for waste disposal with the following conditions:
i. The agreement is effective from January 1, 2021, until December 31, 2023.
ii. A garbage truck arrives twice a month on every second and fourth Monday of each month.
iii. In most cases, this means a two-week interval. However, in some cases, when there are five Mondays in a month, this would mean a three-week interval.
iv. In such cases, the analyst would like to order additional waste disposal.
How many times during the life of the contract will the analyst have to order extra waste disposal? – 50 Points
a. 10
b. 11
c. 12
d. 13
e. 14
f. 15
[Function used for this Question: my approach is not very efficient, I made a model to calculate the number of Monday of each month, and count if number of Monday >4]
3. A group of friends is playing a board game named Catan. Under the rules of the game, a player might receive resources (e.g., wood, clay, etc.) each turn. Each turn 2 dices are rolled and the sum of points rolled is calculated.
If a player has a city next to a cell that is labeled with the same number as the sum of points rolled, then the player receives the resources provided by the cell.
Player 1 has built 2 cities. One of them is located next to cells numbered 3, 6 and 10. The other city is located next to cells numbered 5, 6 and 9. What is the probability that a player gets any resources next turn? – 50 Points
a. 44.96%
b. 47.24%
c. 50.00%
d. 51.21%
e. 52.80%
f. 63.89%
I don't know the game lol
4. A company has just bought new manufacturing equipment:
i. The acquisition price is $100,000
ii. The purchase was completed and the equipment was installed and launched on December 18th, 2020
iii. The equipment will be depreciated under the straight line principle
iv. Its useful life is assumed to be 10 years
v. Depreciation calculations start one month after the acquisition (i.e., from January 2021)
What is the remaining book value of the equipment at the end of September 2027? – 50
Points
a. $30,833
b. $32,500
c. $33,333
d. $35,000
e. $35,833
f. $36,667
[Function used for this Question: SLN]
5. There is a traffic light near John’s school. John has noticed the following:
i. The traffic light blinks yellow throughout the night
ii. Exactly at 7 AM the traffic light switches to red for pedestrians
iii. Red light is on for pedestrians for exactly 2 minutes
iv. After that, the green light switches on for 15 seconds
v. Then the green light starts blinking for another 10 seconds
vi. The cycle repeats itself up until 10 PM when the blinking yellow lights switch on for the night
What light will be on for pedestrians at 2:43:41 PM when John approaches the traffic light on his way back from school? – 50 Points
a. Red
b. Green
c. Blinking Green
d. Yellow
e. Blinking Yellow
f. Blue
[Function used for this Question: mround]
6. You invest $1,000,000 in an interest-bearing account under the following conditions:
i. The investment is made on January 1, 2021, for a minimum period of 10 years
ii. The interest for the investment is 5.00% per year in Year 1, 5.25% in Year 2, 5.50% in Year 3 and so on (every year the interest rate grows by 0.25%)
iii. The interest for each year is calculated on the last day of the year
iv. The interest does not get paid out but instead compounds into the principal of the investment
What will be the value of the investment after 10 years? – 50 Points
a. $1,689,197
b. $1,725,774
c. $1,811,664
d. $1,862,349
e. $1,900,811
f. $1,999,547
[Function used for this Question: I made a model for calculation]
7. You are valuing a company that you consider adding to your stock portfolio. Here is the key data on the company:
i. The company has just paid its annual dividends of $2.54 per share
ii. The company’s dividends per share are expected to grow in line with the general economy by 2.00% per year
iii. You have estimated the company’s discount rate at 8.48%
What is the intrinsic value of the company’s share using the Gordon Growth Model? – 50
Points
a. $38.84
b. $39.20
c. $39.98
d. $40.01
e. $40.64
f. $41.00
[Function used for this Question: P=D/(r-g)]
My google sheets for solution:
https://docs.google.com/spreadsheets/d/1aNqGwtVcj26qFFcP8nyHlnNj1KMQeHLpDVhWOXl25dE/edit#gid=0
