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2010 Exam 2

# 2010 Exam 2 - Name Math um — Second Exam —~ 11mm...

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Unformatted text preview: Name: Math um — Second Exam —~ 11mm Starting at the end nfyear 1, Aaan invesra \$2,1lﬂﬂ each year for m yearn in account A earning 5% effective annual rate. He reinveani each interest payment in aeenunt B earning 3% effeen've annual Determine darnn’a overall annual yield rare uverﬂ yeara,_asaurning he does not make any withdrawals during the 2!] year period. oi Jami mgreéam‘m‘qm “swim :ﬁm,m 1.4511) Jr (Hi—1._‘r_._-___l__.l...l_ .1___l_ ..l,%..._____ _-| ¢tlafrsfa7£ﬁiautl 10 L. ii Jr {ll-ﬁlm [ran .1____. . [m 1261: 35% [aﬁ—LJFL_.___._ ..____l_. I... ‘1,le Jircn makes a series of payments into a Fund at the beginning of each year for 2D years. The ﬁrst payment is 1110. Each subsequent payment through the tenth year decreases by 3% from the previous payment. After the tenth payment, each payment increases by 4% from the previous payment. The Fund earns interest at an annual effccﬁt'e rate of "3%. Determine the amount in his account at the end of 2!] years. {ma T I ' +F ‘MMLﬁTW 41" ' Let? {‘7‘}? ‘i a; 1‘0 {Ehw‘i'IﬂW’ Jr [aroma] else a "if " ”‘ ‘— l‘rlll 1‘s?” 1 ._ ﬁ 3 {53‘ q] Ehiik L ‘ F l e? am ﬂu curl The hntrnwt't in a \$2335Uﬂﬂ' loan makes interest payment at the end of each 6 months for E yeatﬁ. These are ealmlated using an effective discount rate at {5.5%. Each time he makes an interest payment, the hnnnwcr also makes a deposit inte- a ainking fund {SF} earning a nominal rate of 4.2% convertible mnnthly. The mount of the SF deposit is D in the ﬁrst 3 years and 2D in the remaining 5 years. The SF balance at the end of 3 years is equal tn the loan balance. Find D. HE}ng w:th \$11. it- L G“? Own—MM EETC: at: {Kid-CHINE? To Do WLTH T315. QﬁLauLh—flnm D t. 7qu0" Shawn barrows \$1ﬂﬂ,ﬂﬂﬂ at interest rate 6% compounded annually. She repays the lean with annual payments at the entl 01" each year fat 20 years. The payments are as follows: \$X for the ﬁrst 2 years \$3~X fat the next 4 years 52):: for the next 5 years 55X fat the next «6 years \$11K for the next 3 years Calculate the amount of interest and principal paid in the 13““ payment. thjé Fag x 1 C ﬁg :- gs Lam-u gamma: ﬁgFTHL (3:91 :1 Ftﬁlcl 1L tween” 041:; 75mm c¢¢:¢) M3 = “a, W‘s-— 5 1'. was“! 3' W“: 5 (“ML :- 3: Hunt, CH (“ﬁt-*5“ ;‘1L Errpg-32 Cam? 7.11%.?Em H2? 1 E Q MP” 1 “AH” "1:- E MPH“ 3§5;§7?-éo [ma HUT : ny?q+gewtﬂk - ’ —— Ht 9 ('5, X T W'lﬁ 376 ' 29:33th PM“: : mam: 413w: Dn 1,11,? 2111!], Michelle takes out a 15-year variable rate mortgage to purchase a condo in Santa Monies. The loan is for \$5ﬂﬂ,ﬂﬂ{| and payment is made montlﬂy at the end of each month. I The initial rate is 3%, (all intetest rates are compounded monthly in this problem). I The rate increases to 3% effective if 1,! 2015. I Mlehelle cannot afford a monthly payment of more than \$3,5ﬂﬂ, so she negotiated to pay off the loan over 12 years from I! 132015 and she also makes a one-time payment of \$ X to reduce the loan halanee on 12f31f2014 such that the payment over the 12 years are exactly \$3,5ﬂl} 1What is X? X : “asst-2:9 F WEEWWO A 3“ yea: \$1.,ﬂﬁﬂ par value bond with quarter-{y coupons has a 6% annual coupon rate and redemption value of \$1,201? is purchased to yield 8% compounded annuaﬂy. 1What is the amortization of the die-count," premium during the HT11 year-of the bond? ﬁlﬂﬂﬂ par value 15-year bond with armual coupons and redeemable at menu-it}; at 12m is purchased for P to yield an annual effective rate of 15%. The ﬁrst coupon is El}. Each subsequent coupon is 4% greater than the preceding coupon. Calculate P and the amount of the amortization of the premium in the 9*? coupon [7‘55 2 (toé'-§Ee%‘iﬁé»m : { ice-ﬁe (QM-“£3 ‘3'. PE :- [ZCJ'D A: gaCl.oEp> Fl ‘6' [HIV-I h- .aiﬁ-l W757 Leer P“??? + “7'9 M H . 1-- "1 to [Jig _ 61;] H '22?“ 4‘ we?“ 1270.26 7533‘ PM“ :- 95(an .: waoq M3 217570.1'; x-o75‘1 [DZ-77 Rude : [mam—101.77 :- (Ha XYZ corporation issues 15-year \$1,000 par value semi-annual coupon bonds 1with annual coupon rate of T00. The current yield on the bond is 10% compounded semiannually. Due to cash ﬂow problems, XYZ will not be able to pay the required coupons _ for the next 4 years. It proposes to pa},r them hack to bond-holders at the time of the 9*“ coupon, accumulated with 5% interest compounded semi-annually. Assuming that the yield rate does not change, what is the change in the market value of the bond as a result of this restructuring? draw: Cat rcﬂ PM: % OCH : Err—am.“ 13:51:! (WE-'5 735' Emcee; carat?“ FM: \ Ia s Mam :7‘031—5 The following an: annual Spﬂt rates from the yield curve: Term SEEN: Rm; 1 4% 2 5% 3 6% What is the quoted yield rate fur a three-year \$1,ﬂ'l}l] par value annual L‘ﬂupun bond with coupon rate of 8% and redemption value of \$1,101]. %0 “an MQ'G MW «DEL {4&1 0m. 2 i W PMT 3 1|]. During 2MB, 11 common stock pays gri'ar"r‘¢nn‘jvv dividends of \$.51]. Within each calendar year, the dividends are level. However, from nne year tn the next they,T are expected tn increase by 3%. ' Investors’ required return for this stack is “10%. What is the price of this: etc-ck nn 1f1f2ﬂ1i] using the PEIPEt'IlﬂI dividend mode]? ...
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2010 Exam 2 - Name Math um — Second Exam —~ 11mm...

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