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Exam_Two_Review

# Exam_Two_Review - Exam Two Review Format Calculator to 4...

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Exam Two Review Format Calculator to 4 Decimal Places 1. Jack and Jill need a loan to purchase a new house. They borrow \$300,000 in which they will pay back with monthly payments over 30 years. If the loan carries an 8% interest rate, how many more monthly payments are required to pay off the loan once the loan balance reaches \$100,000? 2. Suppose a government bond has a coupon rate of 8% and an ask price of 111:10. If the bond pays interest semi-annually and matures in exactly 5 years, what is the bond’s effective yield? 3. Elizabeth finally won the lottery, after years of buying tickets. Her prize is \$1 million this year, and it will increase 15% every year for 10 years. If the discount rate is 20%, how much is the lottery prize worth today?

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4. Ray and Evelyn just had their first child, Billy. Being financially responsible parents, they want to start saving for Billy’s college education so that they will have \$50,000 by the time he is 18. Assuming that they have \$10,000 in a bank account that pays 4% interest annually today, how much must they add to the account each month to have the \$50,000 by the time Billy is 18?
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Exam_Two_Review - Exam Two Review Format Calculator to 4...

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