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A $50,000 interest- only mortgage loan is made for 30 years at a nominal interest rate of 6 percent. Interest is to be accrued daily, but payment is to be made monthly. Assume 30 days each month.
a. what will the monthly payment be on such a loan?
b. what will the loan balance be at the end of 30 years?
c. what is the effective annual rate on this loan?
You bought one of Great White Shark Repellant Co.’s 8 percent coupon bonds one year ago for $770. These bonds make annual payments and mature 7 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 11 p..
How can currency futures be used by corporations? How can currency futures be used by speculators? Forward versus futures contracts. Compare and contrast forward and futures contracts.
A corporate bond has a coupon rate of 5.5% and a yield to maturity of 4.905%. You buy the bond when it is quoted at 102.10 percent of par. It has been 75 days since the last coupon payment was made. How much must you pay, per bond?
Using 6 decimals, you want to buy one contract of a call option on Stock No. 1 which is currently trading at $40 per share of the stock. The exercise (strike) price is $40. The risk free rate is 10%. The variance is 4%. The call option will expire 6 ..
A. Butcher Timber Company hired your consulting firm to help them estimate the cost of equity. The yield on the firm's bonds is 10.50%, and your firm's economists believe that the cost of equity can be estimated using a risk premium of 4.85% over a f..
The primary disadvantage of accrual accounting is that
The stock of Nogro Corporation is currently selling for $30 per share. Earnings per share in the coming year are expected to be $6. The company has a policy of paying out 40% of its earnings each year in dividends. Assuming the current market price o..
Federal agency securities are similar to Treasury bills in the way that they are both risk-free. Similar to Treasury-bonds, TIPS and STRIP are also issued by the US Treasury.
Jansken Co. has an ROE = .12 and a beta of 1.10. It plans to maintain indefinitely its traditional retention ratio of .65. This year's earnings were $2.50 per share. This year's dividend was jsut paid. The consensus estimate of the coming year's mark..
Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $7.65, but management expects to reduce the pay out by 5 percent per year indefinitely. If you require a return of 12 percent on this stock, what will you pay for a sha..
The prices of longer-term bonds are more volatile than the prices of shorter-term bonds with the same coupon. The prices of bonds with smaller coupons are more volatile than bonds with larger coupons for the same term to maturity.
The price of a stock is $36 and the price of a three-month call option on the stock with a $36 strike is $3.60. Suppose a trader has $3,600 to invest and is trying to choose between buying 1,000 options (10 contracts) or 100 shares of stock. How high..
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