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Unformatted text preview: the time 0 origination fee as an outflow, we are left with the following equation that can be
solved for r:
[ ( ) The monthly r is 1.64%, so the true interest rate expressed as an APR is 1.64*12 = 19.7%
After making the 12th payment, Michael will still owe the bank 36 payments. Find the PV of the
[ ( ) Question 24a:
The purchase price of the bond at time 0 is:
[ ( ) The price of the bond when sold at time 10 (note: 10 payments are remaining) is:
[ ( ) So, the cash flows are:
C0 = -119.08
C1…C9 = 3
C10 = 100 + 3 = 103
[ ( ) ( ) r is .987%, which is 1.97% expressed as an APR...
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This note was uploaded on 09/22/2012 for the course FIN 360 taught by Professor Wang during the Fall '08 term at University of Arizona- Tucson.
- Fall '08