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In all questions, keep six decimal places for interest rates.
1. You have just sold your house for $1,000,000 in cash. Your mortgage was originally a 30-year mortgage with monthly payments and an initial balance of $800,000. The mortgage is currently exactly 18.5 years old, and you have just made a payment. If the interest rate on the mortgage is 7.75% (APR with semi-annual compounding), how much cash will you have from the sale once you pay off the mortgage?
2. You have just purchased a home and taken out a $500,000 mortgage. The mortgage has a 30-year term with monthly payments and an APR (with semi-annual compounding) of 6.5%. How much will you pay in interest, and how much will you pay in principal, during the 20th year (i.e., between 19 and 20 years from now)?
3. You have some extra cash this month and are considering putting it toward your car loan. Your interest rate 7%; your loan payments are $600 per month; and you have 36 months left on your loan. If you pay an additional $1000 with your next regular $600 payment (due in one month), how much will it reduce the amount of time left to pay off your loan?
What part of finance is concerned with design and delivery of advice and financial products to individuals, business and government?
We use no arbitrage to calculate implied forward rates from the spot curve. What does mean when we say that implied forward rates are breakeven rates? What do we use implied forward rates for? Are expectations of future interest rates the only factor..
You have calculated the following power model and associated unit space values:
Explain and differentiate between business organizations.- What form of business organization will give Stamp the most freedom to manage the business as she wishes?
Suppose that your required rate of return on a condo is 12 percent. You are shown one such property, which has an asking price of $150,000. The sales representative shows you the followin g cash flow projections for a holding period of 6 years: Shoul..
Dew Drop In, Inc. announces is quarterly dividend will increase from $3.80 to $4.00. After the announcement, the price of Dew Drop In, Inc.'s stock drops. The most likely explanation is that the stock market is a perfect market. investors were expect..
What is the present value of a growing perpetuity that makes a payment of $100 in the first year, which thereafter grows at 3% per year? Apply a discount rate of 7%.
A company wants to replace a machine with a modern, more efficient model with a longer life expectancy. The equipment requires an initial investment of $600,000 in Year 0. The firm's WACC is 16% and the risk-free rate is 6%. The analyst develops the ..
Fetzer Company declared a $0.25 per share cash dividend. The company has 360,000 shares authorized, 342,000 shares issued, and 14,400 shares in treasury stock. The journal entry to record the payment of the dividend is:
What is the yield to maturity (YTM) of a zero coupon bond with a face value of $1,000, current price of $730 and maturity of 7 years? Recall that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized ..
In concept, the RAROC measure indicates a loan is acceptable if the RAROC is greater than the
When projecting the statement of cash flows, the following represent operating cash outflows (select all that apply): Select one or more: A. Decrease in accounts receivable. B. Increase in inventory C. Decrease in accounts payable D. Increase in wage..
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