pq34 - Practice Chapter 3 and 4 Chapter 3 Practice 1...

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Practice Chapter 3 and 4 Chapter 3 Practice 1 Suppose an investor purchases $10,000 of par value of treasury inflation protection security. The real rate (determined at auction) is 3.8%. a. Assume that at the end of the first six months the CPI-U is 2.4 % (annual rate). Compute the inflation adjustment to principle at the end of the first six months, the inflation-adjusted principal at the end of the first six months, and the coupon payment made to the investor at the end of the first six months b. Assume that at the end of the second six months the CPI-U is 2.8% (annual rate). Compute the inflation adjustment to principle at the end of the second six months, the inflation-adjusted principal at the end of the second six months, and the coupon payment made to the investor at the end of the second six months Practice 2 Suppose that a mortgage loan for $100,000 is obtained for 30 years. The mortgage is a level- payment, fixed-rate, fully amortized mortgage. The mortgage rate is 7.5 % and the monthly
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This note was uploaded on 11/06/2010 for the course ECON Econ taught by Professor Liasa during the Spring '10 term at University of San Francisco.

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pq34 - Practice Chapter 3 and 4 Chapter 3 Practice 1...

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