It's due tommorow and need help with these following problems.
Please solve the following problems. Show all relevant time lines and calculations and make sure to highlight the final answer to the question. Where MS Excel is required, please either cut and paste the spreadsheet where it belongs or staple the printout directly from MS Excel. For spreadsheets that are too long to print, just include a sample printout of the first and last pages. Note that some questions require a written answer, not just a number.
Vanilla Ice Co. bonds pay an annual coupon rate of 10% and have 5 years to maturity. If investors' required rate of return is now 8% on these bonds…
Will the bonds be selling at a premium or a discount with respect to their $1000 face value? Why?
b. What is the price of the bonds?
Austin Power Co. bonds have a 14% annual coupon rate. Interest is paid semi-annually. The bonds have a par value of $1,000 and will mature 10 years from now. If the (annual) required rate of return is 12%, what is the price of the Austin Power bonds? [Hint: you need to convert your coupon rate, your number of periods, n, and your req. rate of ret. to a semi-annual basis.]
Consider a $1,000 par value bond with a 9 percent annual coupon that is currently selling for $943. The bond pays interest annually. There are 15 years remaining until maturity.
What is the size of the annual coupon payments?
What is the current yield on the bond?
A preferred share of Phillips, Co. is currently selling for $65.00 on the New York Stock Exchange. If this instrument pays a dividend of $5 a year, what is its yield?
Assume that you plan to buy a share of IBM stock today and to hold it for 2 years. Your expectations are that you’ll receive a dividend of 19.00 at the end of Year 1 and a dividend of $19.25 at the end of Year 2. In addition, you expect to sell the stock for $150 at the end of Year 2. If your expected rate of return is 11 percent, how much should you be willing to pay for this stock today?
A share of common stock has just paid a dividend of $2.00. If the expected long-run growth rate for this stock is 15 percent, and if investors require a 19 percent rate of return, what is the price of the stock?
What would be the interest earned on a $6,000 deposit during the second year of its life if no money is withdrawn from the bank during that time, and the deposit pays an annual interest rate of 2.5 percent, with annual compounding?
Using excel, build a monthly amortization table for a 30-year mortgage on a $350,000 home, no money down. Use 7% as the yearly interest on the loan.
Using the amortization table you built for Question 8, answer the following questions.
How much money will you still owe on the loan after making one full year of payments?
How much money will you still owe on the loan after making 10 full years of payments?
If you want to refinance after 15 years of making payments, how much financing would you need to secure from your bank to do so?
How much money can you expect to pay in interests alone during the 30 year life of the mortgage?
You plan to purchase a $100,000 house using a 30-year mortgage obtained from local credit union. The mortgage rate offered to you is 8.25%. You will make a down payment of 20% of the purchase price.
Calculate your monthly payments on this mortgage.
Calculate the amount of interest and, separately, principal paid in the 25th payment.
Calculate the amount of interest and, separately, principal paid in the 225th payment.
Calculate the amount of interest paid over the life of this mortgage.
You plan to purchase a house for $115,000 using a 30-year mortgage from your local bank. You will make a down payment of 20% of the purchase price.
Your bank offers you the following two options for payment:
Option 1: Mortgage rate of 9% and zero discount points.
Option 2: Mortgage rate of 8.85% and two discount points.
Which option would you choose?
Your bank offers you the following two options for payment:
Option 1: Mortgage rate of 10.25% and 1 discount point.
Option 2: Mortgage rate of 10% and 2.5 discount points.
Which option would you choose? [Hint: consider only the incremental costs and benefits of Option 2 with respect to Option 1]
You just got a promotion and you are now taking home $75,000 a year before taxes. You are thinking about upgrading your home and moving to a nicer neighborhood. You’ve been living for the past six years in a 1,300 square foot, 3 bed/2 bath home, currently valued at $137,000. Thanks to the strong capital appreciation of the past few years, you estimate that after liquidating the mortgage and covering realtor fees, you’ll be able to walk away with $40,000, which you intend to use as down payment on your new home. Your debt payments ratio is only 7% and your credit rating is 700, so qualifying for a loan won’t be a problem. The best bank rate you’ve found is 5.9% fixed for a 30 year mortgage.
Ignoring mortgage insurance premiums, homeowner’s insurance premiums, and property tax obligations, how much of a home could you afford?
Would your mortgage be considered conforming or non-conforming?
Do you think you’ll be required to obtain private mortgage insurance? Why?