Question

7. Ali buys a new car and finances it with a loan of 22,000. He will make n monthly payments of 450.30 starting in one month. He will make one larger payment in n + 1 months to pay off the loan. Payments are calculated using an annual nominal interest rate of 8.4%, convertible monthly. Immediately after the 18th payment he refinances the loan to pay off the remaining balance with 24 monthly payments starting one month later. This refinanced loan uses an annual nominal interest rate of 4.8%, convertible monthly. Calculate the amount of the new monthly payment.

8. Bond A is a 1,000 par value 20-year bond and has 9% coupons payable semiannually and a redemption value of 1,200. Bond A sells for P and yields a nominal interest rate of 10% convertible semiannually. Calculate P.

9. An investor purchased a 25-year bond with semiannual coupons, redeemable at par, for a price of 10,000. The annual effective yield rate is 8%, and the annual coupon rate is 7%. Calculate the redemption value of the bond.

10. A 1,000 par value n-year bond with semi-annual coupons sells for P. The ratio of the semi-annual coupon rate, r, to the desired semi-annual yield rate, i, is 1.03125. The present value of the redemption value is 381.50. Given v n = 0.5889, calculate P.

Answer 1