1. (Bond Valuation Problem) A $1,000 par value bond with a coupon interest rate of 12.8 percent per year paid semiannually matures in 25 years. Draw a CF diagram corresponding to this information and then complete the table below by filling in the prices and YTMs that correspond to the given YTM's and prices respectively. Show all the work for part D - both the PVAt and PV calculations. Then check your answer using your calculator's TVM solver menu or function keys.

PRICE YTM

A. ______________ ___0%____

B. __$1,000______ __________

C. __$ 917.19_____ __________

D. ______________ ___16%____

2. (Bond Coupon Problem) Dunbar Corporation has $1,000 par value bonds on the market with 12 years remaining to maturity. The bonds are selling for $1,226.09, which provides buyers an 8 percent YTM. The bonds make annual coupon payments. What must the

coupon interest rate be on Dunbar's bonds? Draw the appropriate CF diagram and then complete the calculation.

3. Starting three years from today, you make equal annual deposits of $5,000 into an account which offers 12 percent compounded semiannually. (a) How many years from today will it take for your balance to reach exactly $220,606.2574? (b) How many years from today will it take for your balance to reach exactly $233,842.6328? (c) How many years from today will it take for your balance to reach exactly $247,873.1908? [Hint: With semiannual compounding, each of these questions has an exact answer.]

4. (Mortgage Problem) Mr Brown wishes to purchase a house that costs $230,000. His bank requires a 28 percent down payment and will lend him the remainder to be paid back over a 30 year period in monthly installments at an annual rate, r = 15 percent. His first payment is due one month from today.

A. Calculate the amount of Mr. Brown's monthly payments.

B. Complete the first three rows (months) of Mr. Brown's amortization schedule.

Month Monthly Payment Interest Principal End-of-Month

Balance

__1___ _______________ ______ ________ _____________

__2___ _______________ ______ ________ _____________

__3___ _______________ ______ ________ _____________

.

.

.

_360_ ______-________ __-___ ___-____ _____-_______

C. What is the 30-year total (all 360 months) of the Interest column?

D. How much interest will be paid by Mr. Brown during the tenth year of his mortgage payments? That is, what portion of payments #109 through #120 inclusive will go toward paying interest on this mortgage loan?

5. (Loan Amortization Problem) Your company is planning to borrow $2,500,000. This will be a six-year, 13.2 percent per year, annual payment, fully amortized term loan. The first payment will be made one year from today. What fraction of the total annual payment made at the end of year three will represent repayment of principal? [Hint: you need only complete the first three rows of the amortization schedule to answer this question.]