Question
1. Today you borrowed $6,200 to buy yourself a nice new TV because we all know this class is so hard and you deserve something
1. Today you borrowed $6,200 to buy yourself a nice new TV because we all know this class is so hard and you deserve something nice. You agreed to make interest only payments every month for the next 3 years and then at the end of the 3rd year pay back the $6,200 you borrowed. The sales clerk tells you that the monthly payments are $100. Your discount rate is 6%. How much did the TV really cost you i.e., the present value of the interest payments and the repayment of the $6200? (Hint: This is a bond problem; we just changed the term coupon for interest and face value for TV price)
A. $7400.0
B. $8468.1
C. I deserve that TV, the cost does not matter. D. $5472.9 E. $6200.0
2. A 16-year, 4.5 percent coupon bond pays interest annually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield to maturity decreases from 5.7 percent to 5.5 percent?
A. 2.19 percent decrease B. 2.14 percent decrease C. 0.21 percent increase D. 2.14 percent increase E. 2.19 percent increase
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