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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 {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
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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]? ...
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This note was uploaded on 04/09/2012 for the course MATH 172a taught by Professor Kong,l during the Fall '08 term at UCLA.
 Fall '08
 Kong,L
 Math

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