Question

Font Paragraph 12. What is the yield to maturity on a simple loan for $1 million that requires a repayment of $1.5 million after four years? A) 5% B) 10.67% C) 12 24% D) 15% the yield to maturity. 13. For simple loans, the simple interest rate is_ A) greater than B) less than C) equal to D) not comparable to 14. Assume that you borrow $10,000 to purchase a new automobile and that you finance it with a four- year loan at an interest rate of 5.45%. If you make one payment per year for four years, what will the yearly payment be? (Hint: Use the Excel function "PMT", although you can also get the result manually with a simple calculator.) A) $2,500 B) $2,850 C) $3,150 D) $5,450 15. To help pay for college, you have just taken out a $10,000 government loan that makes you pay $1,260 per year for 25 years. However, you don't have to start making these payments until you graduate from college two years from now. What can you say about the vield to maturity of this loan? (12% is the yield to maturity on a normal $1,0000 fixed-payment loan on which you pay $1,260 per year for 25 years.) (Hint: you don't need to calculate the yield to maturity to answer this question.) A) low than 12% B) equal to 12% C) higher than 12 16. Which of the following are TRUE for a coupon bond? A) When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate, B) The price of a coupon bond and the yield to maturity are positively related C) The yield to maturity is greater than the coupon rate when the bond price is above the par value D) The yield is less than the coupon rate when the bond price is below the par value. 17. Which of the following $1,000 face-value securities has the lowest yield to maturity? A) a 10 percent coupon bond selling for $1.000 B) a 10 percent coupon bond selling for $1,100 C) a 12 percent coupon bond selling for $1,000 LR re to search он е

Answer 1

D E F G H J K L M 1 AB 12) Answer is B Present value Future value Term Coupon Yield 1,000,000 1,500,000 0% 10.67% =RATE(C4,C5*C3,C2*-1,C3,0) =RATE(4,0%*1500000,-1000000 1500000,0) =RATE(Term Coupon rate*Par value,-present value, par value,o) 13) Answer is C For simple loans, the simple interest rate is equal to the yield to maturity 10 11 12 14) 10,000 14 Answer is B Present value Future value Term Interest Payment 5% $2,850 =PMT(C15, C14, C12*-1, C13,0) =PMT(5%,4,-10000,0,0) EPMT(Interest, Term-present value, Future value,o) 2015) Answer is A Yield is less than 12%, because the government will losing interest for 2 years. A normal fixed payment loan has a yield of 12%, so by the forgoing interest for 2 years you'll get less yield than 12%.