Monthly payments on a $150,000 mortgage are based on an interest rate of 6.6% compounded semiannually and a 20-year amortization. If a $5000 prepayment is made along with the 32nd payment: 1. How much will the amortization period be shortened? 2. What will be the principal balance after four years?
> Manuel bought a $100,000 bond with a 4% coupon for $92,300 when it had five years remaining to maturity. What was the prevailing market rate at the time Manuel purchased the bond?
> A bond with a face value of $1000 and 15 years remaining until maturity pays a coupon rate of 10%. Calculate its yield to maturity if it is priced at $1250.
> A bond with a face value of $1000 and 15 years remaining until maturity pays a coupon rate of 5%. Calculate its yield to maturity if it is priced at $900.
> Denis purchased a $10,000 face value Ontario Hydro Energy bond maturing in five years. The coupon rate was 6.5% payable semiannually. If the prevailing market rate at the time of purchase was 5.8% compounded semiannually, what price did Denis pay for the
> Calculate the purchase price of each of the $1000 face value bonds. Issue date = Oct 31, 2002 Maturity date = Oct 31, 2027 Purchase date = Apr 30, 2019 Coupon rate (%) = 16.0 Market rate (%) = 5.7
> Calculate the purchase price of each of the $1000 face value bonds. Issue date = Mar 15, 2007 Maturity date = Mar 15, 2032 Purchase date = Sept 15, 2011 Coupon rate (%) = 8.8 Market rate (%) = 17.0
> Calculate the purchase price of each of the $1000 face value bonds. Issue date = Jan 31, 2009 Maturity date = Jan 31, 2039 Purchase date = July 31, 2011 Coupon rate (%) = 5.1 Market rate (%) = 6.0
> Calculate the purchase price of each of the $1000 face value bonds. Issue date = May 15, 2010 Maturity date = May 15, 2030 Purchase date = Nov 15, 2016 Coupon rate (%) = 6.0 Market rate (%) = 4.0
> Evaluate values of the variables. Calculate the result accurate to the nearest cent. L(1 – d1)(1 – d2)(1 – d3) for L = $490, d1 = 0.125, d2 = 0.15, d3 = 0.05
> Calculate the purchase price of each of the $1000 face value bonds. Issue date = Jan 1, 2007 Maturity date = Jan 1, 2027 Purchase date = July 1, 2015 Coupon rate (%) = 7.3 Market rate (%) = 3.8
> The downside of the long-term bond investment story occurs during periods of rising long-term interest rates, when bond prices fall. During the two years preceding September 1981, the market rate of return on long-term bonds rose from 11% to 18.5% compou
> Calculate the purchase price of each of the $1000 face value bonds. Issue date = Dec 15, 1998 Maturity date = Dec 15. 2023 Purchase date = June 15, 2001 Coupon rate (%) = 4.75 Market rate (%) = 5.9
> During periods of declining interest rates, long-term bonds can provide investors with impressive capital gains. An extraordinary example occurred in the early 1980s. In September 1981, the bond market was pricing long-term bonds to provide a rate of ret
> Two and one-half years ago the Province of Saskatchewan sold an issue of 25-year, 6% coupon bonds. Calculate an investor’s percent capital gain for the entire 2 1 2 -year holding period if the current rate of return required in the bond market is: 1. 6.5
> Three years ago Quebec Hydro sold an issue of 20-year, 6.5% coupon bonds. Calculate an investor’s percent capital gain for the entire three-year holding period if the current semiannually compounded return required in the bond market is: 1. 5.5%. 2. 6.5%
> Four and one-half years ago Gavin purchased a $25,000 bond in a new Province of Ontario issue with a 20-year maturity and a 6.1% coupon. If the prevailing market rate is now 7.1% compounded semiannually: 1. What would be the proceeds from the sale of Gav
> Three years after the issue of a $10,000, 6.5% coupon, 25-year bond, the rate of return required in the bond market on long-term bonds is 5.6% compounded semiannually. 1. At what price would the bond sell? 2. What capital gain or loss (expressed as a per
> This problem investigates the sensitivity of the prices of bonds carrying differing coupon rates to interest rate changes. Bonds K and L both have a face value of $1000 and 15 years remaining until maturity. Their coupon rates are 6% and 8%, respectively
> A $1000, 7% coupon bond has 15 years remaining until maturity. The rate of return required by the market on these bonds has recently been 7% (compounded semiannually). Calculate the price change if the required return abruptly: 1. Rises to 8%. 2. Rises t
> Evaluate values of the variables. Calculate the result accurate to the nearest cent. N 1 – d for N = $89.10, d = 0.10
> Bonds M, N, and Q all have a face value of $1000 and all have 20 years remaining until maturity. Their respective coupon rates are 7%, 6%, and 5%. Calculate their market prices if the rate of return required by the market on these bonds is 8% compounded
> Bonds J, K, and L all have a face value of $1000 and all have 20 years remaining until maturity. Their respective coupon rates are 6%, 7%, and 8%. Calculate their market prices if the rate of return required by the market on these bonds is 5% compounded
> Bonds E, F, G, and H all have a face value of $1000 and carry a 7% coupon. The time remaining until maturity is 5, 10, 15, and 25 years for E, F, G, and H, respectively. Calculate their market prices if the rate of return required by the market on these
> Calculate the purchase price of each of the $1000 face value bonds. Issue date = June 15, 2005 Maturity date = June 15, 2030 Purchase date = Dec 15, 2011 Coupon rate (%) = 5.0 Market rate (%) = 6.0
> Bonds A, B, C, and D all have a face value of $1000 and carry a 7% coupon. The time remaining until maturity is 5, 10, 15, and 25 years for A, B, C, and D, respectively. Calculate their market prices if the rate of return required by the market on these
> Bond C and Bond D both have a face value of $1000, and each carries a 4.2% coupon. Bond C matures in 3 years and Bond B matures in 23 years. If the prevailing required rate of return in the bond market suddenly rises from the current 4.5% to 4.8% compoun
> Bond A and Bond B both have a face value of $1000, each carries a 5% coupon, and both are currently priced at par in the bond market. Bond A matures in 2 years and Bond B matures in 10 years. If the prevailing required rate of return in the bond market s
> Eight years ago, Yan purchased a $20,000 face value, 6% coupon bond with 15 years remaining to maturity. The prevailing market rate of return at the time was 7.2% compounded semiannually; now it is 4.9% compounded semiannually. How much more or less is t
> A $25,000, 6.25% coupon bond has 21 1 2 years remaining until maturity. Calculate the bond premium if the required return in the bond market is 5.2% compounded semiannually.
> A $5000, 5.75% coupon bond has 16 years remaining until maturity. Calculate the bond discount if the required return in the bond market is 6.5% compounded semiannually.
> Evaluate values of the variables. Calculate the result accurate to the nearest cent. I r t for r = 0.095, I = $23.21, t = 283 365
> A $1000, 5.5% coupon bond has 8 1 2 years remaining until maturity. Calculate the bond discount if the required return in the bond market is 6.3% compounded semiannually.
> A $1000, 6.5% coupon bond has 13 1 2 years remaining until maturity. Calculate the bond premium if the required return in the bond market is 5.5% compounded semiannually.
> Bernard purchased a $50,000 bond carrying a 4.5% coupon rate when it had 8 years remaining until maturity. What price did he pay if the prevailing rate of return on the purchase date was 5.2% compounded semiannually?
> Calculate the purchase price of each of the $1000 face value bonds. Issue date = June 1, 2010 Maturity date = June 1, 2030 Purchase date = June 1, 2016 Coupon rate (%) = 5.75 Market rate (%) = 4.5
> The interest rate for the first three years of an $80,000 mortgage loan is 7.4% compounded semiannually. Monthly payments are calculated using a 25-year amortization. 1. What will be the principal balance at the end of the three-year term? 2. What will b
> The Melnyks are nearing the end of the first three-year term of a $100,000 mortgage loan with a 20-year amortization. The interest rate has been 7.7% compounded semiannually for the initial term. How much will their monthly payments decrease if the inter
> The Switzers are nearing the end of the first five-year term of a $100,000 mortgage loan with a 25-year amortization. The interest rate has been 6.5% compounded semiannually for Page 560 the initial term. How much will their monthly payments decrease if
> A $100,000 mortgage loan at 7.6% compounded semiannually has a 25-year amortization period. 1. Calculate the monthly payment. 2. If the interest rate were 1% lower (that is, 6.6% compounded semiannually), what loan amount would result in the same monthly
> The Tarkanians can afford a maximum mortgage payment of $1000 per month. What is the maximum mortgage loan they can afford if the amortization period is 25 years and the interest rate is: 1. 4.5% compounded semiannually? 2. 7.5% compounded semiannually?
> The Graftons can afford a maximum mortgage payment of $1000 per month. The current interest rate is 7.2% compounded semiannually. What is the maximum mortgage loan they can afford if the amortization period is: 1. 15 years? 2. 20 years? 3. 25 years?
> Evaluate values of the variables. Calculate the result accurate to the nearest cent. I ÷ Pr for P = $500, I = $13.75, r = 0.11
> A marketing innovation is the “cash-back mortgage” wherein the lender gives the borrower an up-front bonus cash payment. For example, if you borrow $100,000 on a 3% cash-back mortgage loan, the lender will give you $3000 in addition to the $100,000 loan.
> The monthly payments on the Wolskis’ $266,000 mortgage were originally based on a 25-year amortization and an interest rate of 4.5% compounded semiannually for a five-year term. After two years, they elected to increase their monthly payments by $150, an
> The MacLellans originally chose to make payments of $1600 per month on a $138,000 mortgage written at 7.4% compounded semiannually for the first five years. After three years they exercised their right under the mortgage contract to increase the payments
> After three years of the first five-year term at 6.3% compounded semiannually, Dean and Cindy decide to take advantage of the privilege of increasing the payments on their $200,000 mortgage loan by 10%. The monthly payments were originally calculated for
> A $130,000 mortgage loan at 7.2% compounded monthly has a 25-year amortization. 1. What prepayment at the end of the first year will reduce the time required to pay off the loan by one year? (Assume the final payment equals the others.) 2. Instead of the
> A $100,000 mortgage loan has a 25-year amortization. 1. Calculate the monthly payment at interest rates of 4%, 6%, and 8% compounded semiannually. 2. By what percentage does the monthly payment on the 8% mortgage exceed the monthly payment on the 4% mort
> The interest rate for the first five years of a $120,000 mortgage is 4.15% compounded semiannually. Monthly payments are based on a 25-year amortization. If a $5000 prepayment is made at the end of the second year: 1. How much will the amortization perio
> A $100,000 mortgage at 3.8% compounded semiannually with a 25-year amortization requires monthly payments. How much will the amortization period be shortened if payments are increased by 10% starting in the second year, and a $10,000 lump payment is made
> A $100,000 mortgage at 7.1% compounded semiannually with a 20-year amortization requires monthly payments. How much will the amortization period be shortened if a $10,000 lump payment is made along with the 12th payment and payments are increased by 10%
> Evaluate values of the variables. Calculate the result accurate to the nearest cent. 7x(4y – $8) for x = $3.20, y = $1.50
> A $100,000 mortgage at 4.3% compounded semiannually with a 25-year amortization requires monthly payments. The mortgage allows the borrower to miss a payment once each year. How much will the amortization period be lengthened if the borrower misses the 1
> A $100,000 mortgage at 6.75% compounded semiannually with a 20-year amortization requires monthly payments. The mortgage allows the borrower to miss a payment once each year. How much will the amortization period be lengthened if the borrower misses the
> A $100,000 mortgage at 6.8% compounded semiannually with a 20-year amortization requires monthly payments. The mortgage allows the borrower to “double up” on a payment once each year. How much will the amortization period be shortened if the borrower dou
> A $100,000 mortgage at 6.2% compounded semiannually with a 25-year amortization requires monthly payments. The mortgage allows the borrower to “double up” on a payment once each year. How much will the amortization period be shortened if the borrower dou
> A $100,000 mortgage at 4.9% compounded semiannually with a 20-year amortization requires monthly payments. The mortgage allows the borrower to increase the amount of the regular payment by up to 10% once each year. How much will the amortization period b
> A $100,000 mortgage at 6.9% compounded semiannually with a 25-year amortization requires monthly payments. The mortgage entitles the borrower to increase the amount of the regular payment by up to 15% once each year. How much will the amortization period
> The interest rate on a $100,000 mortgage loan is 7% compounded semiannually. 1. Calculate the monthly payment for each of 15-year, 20-year, and 25-year amortizations. 2. By what percentage must the monthly payment be increased for a 20-year amortization
> A $200,000 mortgage at 6.6% compounded semiannually with a 20-year amortization requires monthly payments. The mortgage allows the borrower to prepay up to 10% of the original principal once each year. How much will the amortization period be shortened i
> A $200,000 mortgage at 6.6% compounded semiannually with a 25-year amortization requires monthly payments. The mortgage allows the borrower to prepay up to 10% of the original principal once each year. How much will the amortization period be shortened i
> The interest rate on a $100,000 mortgage loan is 4% compounded semiannually. 1. What are the monthly payments for a 25-year amortization? 2. Suppose that the borrower instead makes weekly payments equal to one-fourth of the monthly payment calculated in
> Evaluate expression for the given values of the variables. Calculate the result accurate to the nearest cent. P ( 1 + r t 1 ) + S 1 + r t 2 for P = $470, S = $390, r = 0.075, t 1 = 104 365 , t 2 = 73 365
> Repeat Problem 1 with the change that Vencap’s cost of capital is 8%. Data from Problem 1: Vencap Enterprises is evaluating an investment opportunity that can be purchased for $55,000. Further product development will require contributions of $30,000 in
> Marge and Homer Sampson have saved $95,000 toward the purchase of their first home. Allowing $7000 for legal costs and moving expenses, they have $88,000 available for a down payment. Their bank uses 32% for the GDS ratio and 40% for the TDS ratio. 1. Ba
> The Archibalds are eligible for CMHC mortgage loan insurance. Consequently, their limits are 95% for the loan-to-value ratio, 32% for the GDS ratio, and 40% for the TDS ratio. 1. Rounded to the nearest $100, what is the maximum 25-year mortgage loan for
> The Delgados have a gross monthly income of $6000. Monthly payments on personal loans total $500. Their bank limits the gross debt service ratio at 33% and the total debt service ratio at 42%. 1. Rounded to the nearest $100, what is the maximum 25-year m
> The interest rate for the first five years of a $27,000 mortgage loan was 3.25% compounded semiannually. The monthly payments computed for a 10-year amortization were rounded to the next higher $10. 1. Calculate the principal balance at the end of the fi
> Many mortgage lenders offer the flexibility of dividing a mortgage loan between a fixed interest rate portion and a variable interest rate portion. (A variable-rate mortgage is sometimes referred to as an adjustable-rate mortgage, abbreviated ARM.) The v
> A $40,000 mortgage loan charges interest at 6.6% compounded monthly for a four-year term. Monthly payments were calculated for a 15-year amortization and then rounded up to the next higher $10. 1. What will be the principal balance at the end of the firs
> Five years ago, Ms. Halliday received a mortgage loan from the Scotiabank for $60,000 at 7.8% compounded semiannually for a five-year term. Monthly payments were based on a 25-year amortization. The bank is agreeable to renewing the loan for another five
> A $100,000 mortgage loan at 5.2% compounded semiannually requires monthly payments based on a 25-year amortization. Assuming that the interest rate does not change for the entire 25 years, complete the following table.
> The monthly payments on a $15,000 loan at 6.0% compounded monthly are $275. 1. Calculate the interest component of Payment 13. 2. Calculate the principal component of Payment 44. 3. Calculate the final payment.
> A five-year loan of $20,000 at 6.8% compounded quarterly requires monthly payments. 1. Calculate the interest component of Payment 47. 2. Calculate the principal component of Payment 21. 3. Calculate the interest paid in Year 2. 4. How much do Payments 4
> Evaluate expression for the given values of the variables. Calculate the result accurate to the nearest cent. R i [ 1 − 1 ( 1 + i ) n ] for R = $630, i = 0.115, n = 2
> The interest rate on a $50,000 loan is 7.6% compounded semiannually. Quarterly payments will pay off the loan in ten years. 1. Calculate the interest component of Payment 8. 2. Calculate the principal component of Payment 33. 3. Calculate the total inter
> Semiannual payments are required on an $80,000 loan at 8.0% compounded annually. The loan has an amortization period of 15 years. 1. Calculate the interest component of Payment 5. 2 Calculate the principal component of Payment 17. 3. Calculate the intere
> A $125,000 loan at 6.0% compounded semiannually will be repaid by monthly payments over a 20-year amortization period. 1. Calculate the interest component of Payment 188. 2. Calculate the principal component of Payment 101. 3. Calculate the reduction of
> A five-year loan of $25,000 at 7.2% compounded quarterly requires quarterly payments. 1. Calculate the interest component of Payment 10. 2. Calculate the principal component of Payment 13. 3. Calculate the total interest in Payments 5 to 10 inclusive. 4.
> The interest rate on a $14,000 loan is 8.4% compounded semiannually. Semiannual payments will pay off the loan in seven years. 1. Calculate the interest component of Payment 10. 2. Calculate the principal component of Payment 3. 3. Calculate the interest
> Using the Composition of Loan Payments Chart An interactive chart for investigating the composition of loan payments is provided on Connect. In Student Edition, find “Composition of Loan Payments.” The chart provides cells for entering the essential info
> Elkford Logging’s bank will fix the interest rate on a $60,000 loan at 8.1% compounded monthly for the first four years. After four years, the interest rate will be fixed at the prevailing five-year rate. Monthly payments of $800 (except for a smaller fi
> Christina has just borrowed $12,000 at 9% compounded semiannually. Since she expects to receive a $10,000 inheritance in two years when she turns 25, she has arranged with her credit union to make monthly payments that will reduce the principal balance t
> Elkford Logging’s bank will fix the interest rate on a $60,000 loan at 8.1% compounded monthly for the first four-year term of an eight-year amortization period. Monthly payments are required on the loan. 1. If the prevailing interest rate on four-year l
> Ms. Esperanto obtained a $40,000 home equity loan at 7.5% compounded monthly. 1. What will she pay monthly if the amortization period is 15 years? 2. How much of the payment made at the end of the fifth year will go toward principal and how much will go
> Evaluate expression for the given values of the variables. Calculate the result accurate to the nearest cent. R [ ( 1 + i ) n − 1 i ] ( 1 + i ) for R = $910, i = 0.1038129, n = 4
> An annuity paying $1400 at the end of each month (except for a smaller final payment) was purchased with $225,000 that had accumulated in an RRSP. The annuity provides a semiannually compounded rate of return of 5.2%. 1. What amount of principal will be
> Monthly payments are required on a $45,000 loan at 6.0% compounded monthly. The loan has an amortization period of 15 years. 1. Calculate the interest component of Payment 137. 2. Calculate the principal component of Payment 76. 3. Calculate the interest
> Guy borrowed $8000 at 7.8% compounded monthly and agreed to make quarterly payments of $500 (except for a smaller final payment). 1. How much of the 11th payment will be interest? 2. What will be the principal component of the sixth payment? 3. How much
> A 25-year annuity was purchased with $225,000 that had accumulated in an RRSP. The annuity provides a semiannually compounded rate of return of 5.2% and makes equal month-end payments. 1. What amount of principal will be included in Payment 206? 2. What
> Guy borrowed $8000 at 7.8% compounded monthly and agreed to repay the loan in equal quarterly payments over four years. 1. How much of the fifth payment will be interest? 2. What will be the principal component of the 11th payment? 3. How much interest w
> An annuity providing a rate of return of 5.6% compounded quarterly was purchased for $27,000. The annuity pays $800 at the end of each quarter (except for a smaller final payment). 1. How much of the 16th payment is interest? 2. What is the principal por
> A $37,000 loan at 8.2% compounded semiannually is to be repaid by semiannual payments of $2500 (except for a smaller final payment). 1. What will be the principal component of the 16th payment? 2. What will be the interest portion of the sixth payment? 3
> A 10-year annuity providing a rate of return of 5.6% compounded quarterly was purchased for $25,000. The annuity makes payments at the end of each quarter. 1. How much of the 25th payment is interest? 2. What is the principal portion of the 13th payment?
> A $37,000 loan at 8.2% compounded semiannually is to be repaid by equal semiannual payments over 10 years. 1. What will be the principal component of the sixth payment? 2. What will be the interest component of the 16th payment? 3. How much will Payments
> A $30,000 loan at 6.7% compounded annually requires monthly payments of $450. 1. Calculate the interest component of Payment 29. 2. Calculate the principal component of Payment 65. 3. Calculate the final payment.
> Evaluate expression for the given values of the variables. Calculate the result accurate to the nearest cent. R [ ( 1 + i ) n − 1 i ] for R = $550, i = 0.085, n = 3
> The interest rate on a $100,000 loan is 7.2% compounded semiannually. The monthly payments on the loan are $700. 1. Calculate the interest component of Payment 221. 2. Calculate the principal component of Payment 156. 3. Calculate the final payment.
> Quarterly payments of $3000 are required on an $80,000 loan at 8.0% compounded quarterly. 1. Calculate the interest component of Payment 30. 2. Calculate the principal component of Payment 9. 3. Calculate the final payment.
> A $40,000 loan at 6.6% compounded monthly will be repaid by monthly payments over ten years. 1. Calculate the interest component of Payment 35. 2. Calculate the principal component of Payment 63. 3. Calculate the reduction of principal in Year 1. 4. Calc
