Assignment 1_Winter 2010

Assignment 1_Winter 2010 - AP/ADMS4504 Assignment #1 Winter...

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AP/ADMS4504 Assignment #1 Winter 2010 Instructions: (1) This assignment is to be done individually. You must sign and submit the standard cover page supplied as the last page of this assignment . (2) Before you start, please read the note “ Writing Style Required for AP/ADMS4504 Assignments ” posted in the “Assignments” folder on the course web site. Please stick to the writing guidelines suggested in the note. (3) This assignment is due at the start of class in the week starting February 9, 2010 . (4) This assignment is to be either handwritten or printed out. Work that is too difficult to read due to messiness and poor handwriting will receive zero credit. You must show your work to receive full credit. (5) This assignment carries a total mark of 100 points. (6) Late assignments will not be accepted whether for technical or any other reason. (7) Decimal places: please keep at least 4 in your calculations and 2 in your final answers. Question 1 (10 marks) This question has two related parts, (a) and (b). Please note : in both parts (a) and (b) below, first assume the mortgage is a Canadian mortgage, and then redo the calculations assuming an American mortgage. Consider the following Adjustable Rate Mortgage (ARM): Jennifer bought a house three years ago (January 1, 2007) at a price of $400,000. The interest rate for the first three years of this 30-year mortgage was fixed at 3% APR semiannually compounded and no down payment was required. Starting Year 4, (January 1, 2010) the rate adjusts to the Treasury rate plus 3.6% (also APR, compounded semiannually). (a) If the Treasury rate now (January 1, 2010) stands at 4%, what will be the
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This note was uploaded on 01/26/2010 for the course ADMS 4504 taught by Professor Lee during the Spring '08 term at York University.

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Assignment 1_Winter 2010 - AP/ADMS4504 Assignment #1 Winter...

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