Questions:
Question 1:
A loan officer states, "Thousands of dollars can be saved by switching to a 15-year mortgage from a 30-year mortgage." Calculate the difference in payments on a 30-year mortgage at 9% interest versus a 15-year mortgage with 8.5% interest. Both mortgages are for $300,000 and have monthly payments. What is the difference in total dollars that will be paid to the lender under each loan?
Question 2:
What are the differences between the bond's coupon rate, current yield, and yield to maturity?
Question 3:
Assume the total expense for your current year in college equals $20,000. Approximately how much would your parents have needed to invest 21 years ago in an account paying 8% compounded annually to cover this amount?
Question 4:
Kessen Inc.'s bonds mature in 7 years, have a par value of $1,000, and make an annual coupon payment of $70. The market interest rate for the bonds is 8.5%. What is the bond's price?