Question
1) Consider a situation in which you take loan from a bank worth $200,000 to buy a house. The fixed-rate mortgage gives you 30 years
1) Consider a situation in which you take loan from a bank worth $200,000 to buy a house. The fixed-rate mortgage gives you 30 years to pay the loan at an annual rate of 8%.
a) Calculate the value for the annual payment that you must pay under this contract.
b) What will be the monthly payment?
2) Calculate the YTM on each of the following three bonds:
i. Bond A - has a price of $900 and pays $20 dollars of interest annually forever
ii. Bond B - has a price of $950, Face Value of $1000 and 1 years to maturity
iii. Bond C - has a price of $950, Face Value of $1000 and 2 years to maturity
iv. Bond D - has a price of $890, Face Value of $1000, coupon rate of 5% and 10 years to maturity
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