This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
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 {llﬁlm [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: {KidCHINE? 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 Lamu 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 Errpg32 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 15year 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 onetime 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 : “asst2:9 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 diecount," premium during the HT11 yearof the
bond? ﬁlﬂﬂﬂ par value 15year bond with armual coupons and redeemable at menuit};
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 : { iceﬁe (QM“£3 ‘3'.
PE : [ZCJ'D A: gaCl.oEp> Fl ‘6' [HIVI h .aiﬁl
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'; xo75‘1 [DZ77
Rude : [mam—101.77 : (Ha XYZ corporation issues 15year $1,000 par value semiannual 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 bondholders at the time
of the 9*“ coupon, accumulated with 5% interest compounded semiannually. 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 threeyear $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: etcck nn 1f1f2ﬂ1i] using the PEIPEt'IlﬂI dividend mode]? ...
View
Full Document
 Fall '08
 Kong,L
 Math, Interest Rates, Tn, oi Jami

Click to edit the document details