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So, if cash flow starts in year 4, PV of that will fall on year 3. Put that PV into FV, N=3, enter I%, then solve for PV again forthe final answer.Mortgages-mortgages…C/Y always = 2, FV=0-ignore the “term” of the mortgage…amortizationis what you look atN = 1) # of payments remaining OR2) amortization period*# of payments per year-if there’s a down payment, PV = price of house*(1-down payment %)….remember PV is always NEGATIVEMortgages and finding balance and interest after X years-first, need N, I%, PV, and PMTfilled in (FV=0)-Press F6 for AMT. The rule is to always add ONE to PM1. -if asked for mortgage balance after, say, 5 years and monthly payments made and mortgage is for 20 years F6 for AMT, in PM1= 5 years*12 monthly payments + 1= 60+1=61, PM2= 20 years*12 = 240. Then press sum of PRN.-if asked for mortgage balance with five years LEFT (remaining) and monthly payments made and mortgage is for 20 years, then that means 15 years have passed (20 years – 15 years = 5 years left) F6for AMT, in PM1= 15 years*12 monthly payments + 1= 180+1=181, PM2= 20 years*12 = 240. Then press sum of PRN.- if asked for interest paid for FIRST 5 years and monthly payments made and mortgage is for 20 years F6 for AMT, PM1= 0 year + 1, PM2= 5 years*12 monthly payments = 60. Then press sum of INT.- if asked for interest paid over the last five years LEFT and monthly payments made and mortgage is for 20 years, then thatmeans 15 years have passed (20 years – 15 years = 5 years ) F6 for AMT, PM1= 15 years*12 monthly payments + 1 = 180+1=181, PM2= 20 years*12 monthly payments = 240.Then presssum of INT.BondsN= # of payments REMAINING(NOT # of years, so if it’s a 10-year, semi-annual bond that was issued 2 years ago, N= 8 years remaining*2 payments per year= 16).I%(I/Y) = yield to maturity(YTM) = rate of return= current interest rate = market interest rate; all these areNOMINAL rates PV= current market price of bond (enter as NEGATIVE)PMT= coupon rate * face (par) value / 2 (if semi-annual, divide by 2; assume face value is $1000)FV= face value (assume $1000)IF annual, P/Y = 1, C/Y=1 ; If semi-annual,P/Y = 2, C/Y=2If the questions asks for the “effective yield,” then make C/Y = 1.If it’s a zero-coupon bond ( PMT=0), the calculation is like an ANNUAL bond (also P/Y =1, C/Y=1 )Interest Rate Risk (how sensitive a bond’s price is to interest rate changes )- #1 the longer the time to maturity, the greater the interest rate risk (ie the more its price will change when rates change)#2 lower the coupon rate, the greater the interest rate risk-bond prices and interest rates (YTM) are inverselyrelated; if rates go down, bond prices go up and vice versa-if YTM = coupon rate, bond sells at par -if YTM greater than coupon, bond sells below par (discount)-if YTM is less than coupon, bond sells above par (premium)Fisher Equation =(1+R) = (1+r)(1+inflation), R = nominal rate, r = real rate. Some bond questions will give you a real rate and inflation, you’ll need to use Fisher to find the nominal rate, which will represent your yield-to-maturity (YTM). Then put the nominal rate as a % into I%Holding Period ReturnN= # of payments received during HOLDING period (not # of