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Unformatted text preview: PV = A r 11 (1 + r ) n = $8882 . 74 . 08 11 (1 + 0 . 08) 25 = $94821 . 26 3.8c Using the new Principal from 3.8b and the new r = 9% and new term of 25 years: A = r (1 + r ) n P (1 + r ) n1 = (0 . 09)(1 + 0 . 09) 25 ($94 , 821 . 26) (1 + 0 . 09) 251 = $9653 . 40 2 3.8d Solving for n : 8882 . 74 = (0 . 09)(1 + 0 . 09) n ($94 , 821 . 26) (1 + 0 . 09) n1 n = 37 . 6 years It will take another 37.6 years before the mortgage is paid o for a total of 42.6 years on the mortgage. Question 3.9 Assuming semiannual coupons, n = 36, r = 4 . 5%, Face Value of $100, Coupon Payments = $4 Price = C r 11 (1 + r ) n + F (1 + r ) n = 4 . 045 11 (1 + 0 . 045) 36 + 100 (1 + 0 . 045) 36 = 91 . 17 3...
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This note was uploaded on 04/20/2011 for the course MIE 375 taught by Professor R.kwon during the Spring '11 term at University of Toronto Toronto.
 Spring '11
 R.KWON

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