Instead of buying the interest rate down, the developer could consider simply reducing the price by...
Homework Answers
1. most developers do not keep their mortages long enough to recoup the up-front cost of buydowns.
2. prepaying certain amount to lessen the amount of interest paid , will reduce the amount of savins available for other purposes.
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Instead of buying the interest rate down, the developer could
consider simply reducing the price by...
You consider buying a car for a price of $34,000. The car is to be bought on credit with an annual interest rate of 4.2...
You consider buying a car for a price of $34,000. The car is to be bought on credit with an annual interest rate of 4.25%. The credit will be repaid in monthly constant total payments spread over 60 months. The dealer makes a "special" offer to you: a one-year grace period, which means that the first payment will be made only one year after the car is bought (however this period is subject to interest!!!). 1. What is the nominal...
Could you solve/fill the blank? During a recession, the price of goods and services goes down...
Could you solve/fill the blank?
During a recession, the price of goods and services goes down because of low demand. A company that makes Ethernet adapters is planning to expand its production facility at a cost of $1,100,000 1 year from now. However, a contractor who needs work has offered to do the job for $830,000 provided the company will do the expansion now instead of 1 year from now. If the interest rate is 11% per year, how much...
While buying a new car, Sophie made a down payment of $800 and agreed to make...
While buying a new car, Sophie made a down payment of $800 and agreed to make month-end payments of $270 for the next 4 years and 7 months. She was charged an interest rate of 2% compounded semi-annually for the entire term. a. What was the purchase price of the car? b. What was the total amount of interest paid over the term?
While buying a new car, Rachel made a down payment of $700 and agreed to make...
While buying a new car, Rachel made a down payment of $700 and agreed to make month-end payments of $320 for the next 5 years and 7 months. She was charged an interest rate of 2% compounded semi-annually for the entire term. a. What was the purchase price of the car? Round to the nearest cent b. What was the total amount of interest paid over the term?
That's the entire question 1. (Coupon bond price) Consider a 20 year bond that sells at...
That's the entire question
1. (Coupon bond price) Consider a 20 year bond that sells at face value (its price is equal to the final payment you get for it in 20 years). The nominal interest rate is expected to be fixed at 4% and is equal to the implicit rate on the bond. i) How much is the coupon rate of the bond? What is the coupon rate if instead the bond matures in 35 years? ii) Now consider...
1. What is the relationship between real interest rate, nominal interest rate and inflation rate? 2....
1. What is the relationship between real interest rate, nominal interest rate and inflation rate? 2. What are the reasons for very high nominal interest rates in the 1980s? 3. Someone buys a 5 year government treasury bond at $P t a. Can the price be above face value? Why? b. Can the price be below face value? Why? c. If he/she wants to sell it after 2 years, will he/she makes a positive rate of return or negative rate...
The stock price of Google is $587. You have $10,000 to invest. The monthly interest rate...
The stock price of Google is $587. You have $10,000 to invest. The monthly interest rate is 0.5%. a. You think the stock price will go down soon, and want to trade 20 shares. What should you do? Enter 20 for buying 20 shares (on margin if necessary), or -20 for selling or short-selling 20 shares. b. If the initial margin is 50%, what is the minimum additional dollar amount that you have to deposit in your brokerage account? c....
Consider a call and a put option, both with strike price of $30 and 3 months to expiration. The call trades at $4, the put price is $5, the interest rate is 0, and the price of the underlying stock is...
Consider a call and a put option, both with strike price of $30 and 3 months to expiration. The call trades at $4, the put price is $5, the interest rate is 0, and the price of the underlying stock is $29. a.Suppose the stock does not pay dividends. Is there an arbitrage? If so, write down the sequence of trades and calculate the arbitrage profit you realize in 3 months. If not, explain why not. b.Suppose the stock will...
Problem 2-Buying a Car You see a car that you absolutely must have. The price tag...
Problem 2-Buying a Car You see a car that you absolutely must have. The price tag says $18,450, but you want to keep your payment low over a 4-year period. Since you want to make payments no larger than $250 at the end of every month, you must find a bank to finance a loan for you. The bank you find charges interest at a rate of 6.99% compounded monthly. Use this information to find the following: The amount you...
Consider a 10 year bond with a coupon rate of 7% and annual coupon payments. Draw a graph showing the relationship betwe...
Consider a 10 year bond with a coupon rate of 7% and annual coupon payments. Draw a graph showing the relationship between the price and the interest on this bond. The price should be on the y-axis and the interest rate on the x-axis. To compute the various prices, consider interest rates between 2% and 12% (use 0.5% increments). So your x-axis should go from 2%, then 2.5% … until 11.5% and then 12%. Is the relationship linear (i.e. is...
You consider buying a car for a price of $34,000. The car is to be bought on credit with an annual interest rate of 4.25%. The credit will be repaid in monthly constant total payments spread over 60 months. The dealer makes a "special" offer to you: a one-year grace period, which means that the first payment will be made only one year after the car is bought (however this period is subject to interest!!!). 1. What is the nominal...
Could you solve/fill the blank?
During a recession, the price of goods and services goes down because of low demand. A company that makes Ethernet adapters is planning to expand its production facility at a cost of $1,100,000 1 year from now. However, a contractor who needs work has offered to do the job for $830,000 provided the company will do the expansion now instead of 1 year from now. If the interest rate is 11% per year, how much...
That's the entire question
1. (Coupon bond price) Consider a 20 year bond that sells at face value (its price is equal to the final payment you get for it in 20 years). The nominal interest rate is expected to be fixed at 4% and is equal to the implicit rate on the bond. i) How much is the coupon rate of the bond? What is the coupon rate if instead the bond matures in 35 years? ii) Now consider...
Problem 2-Buying a Car You see a car that you absolutely must have. The price tag says $18,450, but you want to keep your payment low over a 4-year period. Since you want to make payments no larger than $250 at the end of every month, you must find a bank to finance a loan for you. The bank you find charges interest at a rate of 6.99% compounded monthly. Use this information to find the following: The amount you...
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