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Sample 1
Please write clearly your name and SMU user ID in the spaces provided below now.
Name: ________________________________
UserID:_______________
Seat Number:_______________
For each question, it is advisable to read through the whole question first before doing
any of its parts.
Write your answers in the space provided in each question.
Softcopy submission of your working is not required.
Question
Mark
1
2
3
Total
2006Term2/LTY
Question 1 (8 marks)
Sam needs to rent a car for his upcoming trip. CheapWheels charges $20.25 per day
plus $.14 a mile. Easy Rider charges $18.25 a day plus $.22 a mile. Sam plans to do a
lot of driving on his 3-day trip.
a) Sketch an Excel model to support your analysis.
(3 marks)
(2 marks)
c) At what mileage will Sam be indifferent to either rental company? If the trip is shorter
than 3 days, will the indifferent mileage be longer or shorter?
(2 marks)
2006Term2/LTY
(1 mark)
Question 2 (9 marks)
Alphonso borrowed $50,000 from Timmy and promised to return the money in monthly
installments over 2 years. Each month, the repayment amount to Timmy should rightly
be about equal for ease of tracking. Since Alphonso does not have a steady income and
is not sure he can meet all the planned (equal) payments, he asked to structure the
payments such that he will try to pay the required amount as far as possible. If he is
short of money, he must pay at least 70% of the planned payment, and if he has excess
money, he can pay more than the planned payment. The planned monthly payment
amount for the remaining loan balance is always recomputed each month as if it is a
fresh loan for the remaining number of months. The agreed interest rate for the loan is
4% per annum.
a) Sketch an Excel model to support their analysis. Include columns to show the
monthly interest payment, loan repayment, loan outstanding and planned and actual
repayments.
(3 marks)
2006Term2/LTY
(3 marks)
2006Term2/LTY
2006Term2/LTY
D4
E4
D7:I7
<Input>
<Input>
<Input>
D10:D22
______________________________________
E10
______________________________________
b) If the coffee price this coming season is expected to be $0.75 per kg, what should he
do? What if the coffee price per kg goes up to $0.80, $0.85, $0.90, $0.95 or even
$1.00? Explain how the profit changes with changes in the price.
(3 marks)
2006Term2/LTY
c) It can be assumed that coffee price behaves like a random walk: the magnitude of
annual percentage change has a stationary distribution and the coffee price is equally
likely to increase or decrease. Using the table below, sketch out the model of how
you would now simulate the 2007 coffee price.
(2 marks)
C49
<Input>
E49
_____________________________________
F49
_____________________________________
D53
____________________________
B64
____________________________
2006Term2/LTY