1) You have just started your undergraduate study and expect to graduate in four years. You are planning to take a part-time job that will generate $1800 per month in the coming 4 years (end of month payments). In addition, your parents will give you $1700 at the beginning of each month till your graduation (beginning of month payments). The school tuition fees are covered by your parents (you dont need to worry about the school fees). You expect that you need to spend $2,200 per month while studying (at the end of every month). After graduation, you plan to open your own business. Assume a 6% discount rate compounded semi-annually. (12 pts)

1. What is the PV of all the money you expect to receive in the coming 4 years? (6 pts)

2. What is the PV of your expenses during these four years? (3 pts)

3. How much money you will have saved by the end of year four (needed to start your business)? (3 pts)

2)You are planning to take an unpaid leave and travel to Mars, 6 years from now. You have already saved all the money needed for your Mars trip (all the Mars trip costs are already covered; you dont worry about them). Your main worry is how to cover your family expenses during your four-years trip to Mars (you expect to stay on Mars for four years). You expect your family needs $4,000 a month during your stay on Mars (end of month expenses). To secure these funding you decided to take a part time job. With your new part time job, you can save $2,000 each month for the coming two years (end of months savings). You can also save $1,500 each month in the third and fourth year (end of month savings). How much should you save each month in the fifth and sixth year (end of month saving) so that you can cover your family expenses during your trip to Mars? Assume 12% APR compounded monthly?

3)

You would like to purchase a $40,000 SUV through financing. You are discussing with the car dealer the different financing options. The dealer suggested you finance the car over 5 years. The interest rate the dealer will charge you is 3% APR compounded monthly. You are unsure whether to finance the car over a 5-year or a 7-year period. You are also unsure whether to make monthly or bi-weekly payments. Your friend has just finished taking the FINA2360 course and came to you with the following questions that might help you in your decision-making process. (All payments happen at the end of the periods)

1. If you go with the 5-year financing, monthly payments option, what will be your monthly payments? (2 pts)

2. If you go with the 7-year financing, monthly payments option, what will be your monthly payments? (1 pts)

3. How much total interest will you pay with the 5-year financing, monthly payments option? (1 pts)

4. How much total interest will you pay with the 7-year financing, monthly payments option? (1 pts)

5. In the event you decided to sell the car after 3 years; how much would you need to pay the financial institution to close your car loan with the 5-year financing, monthly payments option? (1 pts)

6. In the event you decided to sell the car after 3 years, how much would you need to pay the financial institution to close your car loan with the 7-year financing, monthly payments option? (1 pts)

7. If you decide to go with the 5-year financing, bi-weekly payments option, what will be your bi-weekly payments? (2 pts)

8. If you decide to go with the 7-year financing, bi-weekly payments option, what will be your bi-weekly payments? (1 pts)

In Excel, present the full amortization table (formulas should be connected) for the below four scenarios:

9. 5 years financing and monthly payments (2 pts)

10. 7 years financing and monthly payments (2 pts)

11. 5 years financing and bi-weekly payments (2 pts)

12. 7 years financing and bi-weekly payments (2 pts)

4)

Exactly 10 years ago, your dad purchased 100 30-yr ABC bonds and 50 20-yr XYZ bonds. The coupon rate on bond ABC is 10% and the coupon rate on bond XYZ is 7%. Coupons are paid semi-annually. The bonds face value is $1,000. Today is the 25^th of September 2021.

1. How much money should your dad have paid originally for these bonds assuming he purchased them at PAR. (1pt)

2. What is the market value of your dads investments if the market interest rate is 10%? (5pt)

3. If interest rates were to increase by 1% (i.e.: the new rate = 11%) how much will your dad lose on ABC bonds? (3.5pt)

4. If interest rates increase by 1% (i.e.: the new rate = 11%) how much will your dad lose on XYZ bonds? (3.5pt)

5. If interest rates increase by 1% (i.e.: the new rate = 11%) how much will your dad lose in total on both ABC and XYZ bonds? (1pt)

6. If interest rates decrease by 1% (i.e.: the new rate = 9%) how much will your dad gain on ABC bonds? (3.5pt)

7. If interest rates decrease by 1% (i.e.: the new rate = 9%) how much will your dad gain on XYZ bonds? (3.5pt)

8. If interest rates decrease by 1% (i.e.: the new rate = 9%) how much will your dad gain in total on both ABC and XYZ bonds? (1pt)

9. Which bond has higher sensitivity to interest rates fluctuations (support your answer with numbers)? (3pt)

10. On the same Excel sheet, draw bond ABC and XYZ price as the YTM moves from 1% to 30% (in 1% increments). (5pt)