Reference no: EM131178711
You plan to take out a 30-year fixed rate mortgage for $100,000. Let P(r) be your monthly payment if the interest rate is f% per year, compounded monthly. Interpret the equations (a) P(3) = 421.60 and (b) P'(3) = 53.93.
(a) Interpret P(3) = 421.60. Select the correct answer below:
a. If the interest rate on the mortgage is 4%, the monthly payment will be $53.93
b. If the interest rate on the mortgage is 3%, the monthly payment will be $53.93
c. If the interest rate on the mortgage is 3% the monthly payment will be $421.60
d. If the interest rate on the mortgage is 4%, the monthly payment will be $421.60
(b) Interpret P'(3) = 53.93 Select the correct answer below.
a. If the interest rate decreases from 4% to 3% , the monthly payment will be approximately $421.60
b. If the interest rate decreases from 4% to 3%, the monthly payment will increase by approximately $421.60
c. If the interest rate increases from 3% to 4%, the monthly payment will increase by approximately $53.93
d. If the interest rate increases from 4% to 4%, the monthly payment will decrease by approximately $53.93.
|
The pension fund from fluctuations in interest rates
: You are to design for a small pension fund a bond portfolio to fund a $10 million obligation due in 4 years. The fund managers would like to use a 2-year zero along with an 8-year zero to fund the obligation. Currently, the yield curve is flat at aro..
|
|
Company weighted average flotation cost
: Suppose your company needs $20 million to build a new assembly line. Your target debt−equity ratio is 0.80. The flotation cost for new equity is 9 percent, but the flotation cost for debt is only 6 percent. What is your company’s weighted average flo..
|
|
Subtract the loan payment from the lease payment
: Sutton Corporation, which has a zero tax rate due to tax loss carry-forwards, is considering a 5-year, $6,000,000 bank loan to finance service equipment. The loan has an interest rate of 10% and would be amortized over 5 years, with 5 end-of-year pay..
|
|
Capital structure shift change the firm cost of equity
: Paxon Corporation uses no debt, its beta is 1.10, and its tax rate is 40%. However, the CFO is considering moving to a capital structure with 30% debt and 70% equity. If the risk-free rate is 5.0% and the market risk premium is 8.0%, by how much woul..
|
|
Interpret the equations
: You plan to take out a 30-year fixed rate mortgage for $100,000. Let P(r) be your monthly payment if the interest rate is f% per year, compounded monthly. Interpret the equations (a) P(3) = 421.60 and (b) P'(3) = 53.93.
|
|
Liquidity and aturity risk premiums are zero
: Assume that the expectations theory holds, and that liquidity and aturity risk premiums are zero, If the annual rate of interest on a 2year Treasury bond is 10.5% and the rate on a 1-yearTreasury ond that is issued today is 12% , What rate of interes..
|
|
Double apportionment
: In allocating costs, which of the following is NOT considered an advantage with respect to “Double Apportionment?” It is simple to do and does not require a computer to calculate It fixes the problems with direct and step-down apportionment Takes int..
|
|
Calculate the degree of operating leverage first
: New Balance produces swimming trunks. The average selling price of one of the company's swimming trunks is $88.66. The variable cost per unit is $18.21, and New Balance has average fixed costs per year of $7164. What is the resulting percentage chang..
|
|
Identify any ethical or unethical behavioral issues
: Conduct an analysis of your selected organization’s financial statements and identify the organization’s short and long term financing risks in its future financial planning. Evaluate the entire selected organization and identify any ethical or uneth..
|