Question

3. Cho pes] You are 20 years old and determined to be a millionaire when you are How much should you save pach week if your annual rate of return on the same porent You just bought a house and have a mortgage of $200,000. The mortgage is to years and has a mortgage rate of 8 percent annually. After 36 payments (ycan A (7 pts) What will be the remaining balance on your mortgage? B. (7 pts) What is the cumulative inter at is the cumulative interest you have paid over the 36 periods A corporate bond matures in 10 years. The bond has an 8 percent semia ars. The bond has an 8 percent semiannual coupon The price or the bond today is $1.075. 1,000. The bond is callable in five years at a call price of 31.030 A. (8 pts) What is the bond's nominal yield to maturity? B. (8 pts) What is the bond's nominal yield to call? C. (zpts) If you bought this bond, which return do you think you would actually earn? D. (2 pts) Suppose the bond had sold at a discount, would the yield to maturity or the yield to call have been more relevant? 6. (14 pts) You are considering an investment in a 40-year security. The security will pay $25a year at the end of each of the first three years. The security will then pay $30 a year at the end of each of the next 20 years. The nominal interest rate is assumed to be 8 percent, and the current price (present value) of the security is $800. Given this information, what is the equal annual payment to be received from Year 24 through Year 40 (i.e., for 17 years)?

Answer 1

1. Number of Periods =(48-20)*Number of Weeks =28*52 =1456
Rate per week =9%/52
FV =1,000,000
Amount to be saved each week =FV/((1+r)^n-1)/r) =1,000,000/((1+9%/52)^1456-1)/(9%/52))=151.80