____ 1. The present value of an annuity will be decreased by

____ 2. You have bo

owed $130,000 to buy a new motor home. Your loan is to be repaid over 15 years at 8% compounded monthly Calculate the principal paid to the bank in month 2 of the loan.

____ 3. A car loan that charges 1.25% interest per month has an annual percentage rate of

____ 4. Alabama Power has prefe

ed stock that pays an annual dividend of $9.44. If the security has no maturity, what is its value to an investor who wishes to obtain a 9 percent rate of return?

____ 5. If you owe $1,200.00, which is the most advantageous way to pay it back assuming a 12% APR discount rate?

____ 6. Which of the following $1,000 face value bonds has a 10% yield, assuming semiannual coupon payments of 8%?

1) a 5 year maturity bond selling for $964.54

2) a 10 year maturity bond selling for $875.39

3) a 20 year maturity bond selling for $828.36

____ 7. When interest rates decrease, what happens to the bond prices of seasoned issues (assume the coupon rate is fixed)?

____ 8. How is prefe

ed stock similar to bonds?

____ 9. Nearly all prefe

ed stock comes with the right to receive all past unpaid dividends before common shareholders can receive any dividends. This right is refe

ed to as:

____ 10. The efficient market hypothesis asserts that:

____ 11. The cu

ent price of Zebar is $32.00 and its last dividend was $.60. What is its return if dividends are expected to grow indefinitely at 8 percent?

12. You have been assigned to estimate the interest rates that your company may have to pay when bo

owing money in the near future. The following information is available.

kPR = 2%

MR = .1% for a 1 year loan increasing by .1% for each additional yea

LR = .05% for a 1 year loan increasing by .05% for each additional yea

DR = 0 for a 1 year loan, .2% for a 2 year loan, increasing.1% for each additional yea

Expected Inflation Rates

XXXXXXXXXXYear 1 = 7%

XXXXXXXXXXYear 2 = 5%

XXXXXXXXXXYear 3 and thereafter = 3%

a.

Calculate the inflation adjustment (INFL) for a 5-year loan.

.

Calculate the appropriate interest rate for a 5-year loan.

13. One year ago a $1,000 face value, 6% coupon bond was selling for $1,100. Since then, the market yield has decreased by two percentage points. The bond pays interest semiannually and now has four years to maturity. What is the bond's price today?

____ 2. You have bo

owed $130,000 to buy a new motor home. Your loan is to be repaid over 15 years at 8% compounded monthly Calculate the principal paid to the bank in month 2 of the loan.

____ 3. A car loan that charges 1.25% interest per month has an annual percentage rate of

____ 4. Alabama Power has prefe

ed stock that pays an annual dividend of $9.44. If the security has no maturity, what is its value to an investor who wishes to obtain a 9 percent rate of return?

____ 5. If you owe $1,200.00, which is the most advantageous way to pay it back assuming a 12% APR discount rate?

____ 6. Which of the following $1,000 face value bonds has a 10% yield, assuming semiannual coupon payments of 8%?

1) a 5 year maturity bond selling for $964.54

2) a 10 year maturity bond selling for $875.39

3) a 20 year maturity bond selling for $828.36

____ 7. When interest rates decrease, what happens to the bond prices of seasoned issues (assume the coupon rate is fixed)?

____ 8. How is prefe

ed stock similar to bonds?

____ 9. Nearly all prefe

ed stock comes with the right to receive all past unpaid dividends before common shareholders can receive any dividends. This right is refe

ed to as:

____ 10. The efficient market hypothesis asserts that:

____ 11. The cu

ent price of Zebar is $32.00 and its last dividend was $.60. What is its return if dividends are expected to grow indefinitely at 8 percent?

12. You have been assigned to estimate the interest rates that your company may have to pay when bo

owing money in the near future. The following information is available.

kPR = 2%

MR = .1% for a 1 year loan increasing by .1% for each additional yea

LR = .05% for a 1 year loan increasing by .05% for each additional yea

DR = 0 for a 1 year loan, .2% for a 2 year loan, increasing.1% for each additional yea

Expected Inflation Rates

XXXXXXXXXXYear 1 = 7%

XXXXXXXXXXYear 2 = 5%

XXXXXXXXXXYear 3 and thereafter = 3%

a.

Calculate the inflation adjustment (INFL) for a 5-year loan.

.

Calculate the appropriate interest rate for a 5-year loan.

13. One year ago a $1,000 face value, 6% coupon bond was selling for $1,100. Since then, the market yield has decreased by two percentage points. The bond pays interest semiannually and now has four years to maturity. What is the bond's price today?

Answered Same DayDec 09, 2021

Sheet1

1

The present value of the annuity will be decreased due to increase in the discount rate

2 Laon Amount 130000 6 12

Number of periods 180 1 2 3

Interest rate annual 8% Tenure 5 Tenure 10 Tenure 20 Kpr 2% Inflation Adjustment

Monthly Interest rate 0.67% Price 964.54 Price 875.39 Price 828.36 MR 0.10% Total inflation incremental 22.8%

FV 1000 FV 1000 FV 1000 LR 0.05%

Total Amount paid back 429899.792063302 Coupon Rate 8% Coupon Rate 8% Coupon Rate 8% DR Annual Inflation 4.19%

Interest amount 299899.792063302 Frequency 2 Frequency 2 Frequency 2 Inflation (Minimum amount the bond seller should charge for the inflation)

Total installments 2388.3321781294 Settlement date 12/10/19 Settlement...

1

The present value of the annuity will be decreased due to increase in the discount rate

2 Laon Amount 130000 6 12

Number of periods 180 1 2 3

Interest rate annual 8% Tenure 5 Tenure 10 Tenure 20 Kpr 2% Inflation Adjustment

Monthly Interest rate 0.67% Price 964.54 Price 875.39 Price 828.36 MR 0.10% Total inflation incremental 22.8%

FV 1000 FV 1000 FV 1000 LR 0.05%

Total Amount paid back 429899.792063302 Coupon Rate 8% Coupon Rate 8% Coupon Rate 8% DR Annual Inflation 4.19%

Interest amount 299899.792063302 Frequency 2 Frequency 2 Frequency 2 Inflation (Minimum amount the bond seller should charge for the inflation)

Total installments 2388.3321781294 Settlement date 12/10/19 Settlement...

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