Question
1.You recently purchased a condo in Vancouver and the purchase price is $800,000 A down payment of 20% of the purchase price was made, and
1.You recently purchased a condo in Vancouver and the purchase price is $800,000 A
down payment of 20% of the purchase price was made, and ve
u took a mortgage for the
remaining amount from your bank. The bank offered
a mortgage at 2.50% APR semi
annual compounding at S years fixed rate term. The mortgage requires monthly payment
with 30 years of amortization
- What is the montly mortage amount
- Let's say, you can manare to extend the mortgage for another 5 vears fixed rate term with the same rate and the same monthly payment and sell the propert after 10 years for $900.000, What would be the total interest you would have paid the bank over 10 vears?
- Your friend said 'fwould always geta mortgage with the lowest interest rate With that, I am getting the best deal do you agree or disagree ?
2. Happy Snow Inc. (HS) issued a bond that matures in 5 years with face value $1.000. The
bond pays 99 semi-annual coupon, and it is priced today
a) What would be the yield to maturity Happy Show offers?
Another company, Happy Rain Inc. (HR) issues bonds with a longer time to
compared to Happy
snow bonds, with all other thins equal
(b) You are interested in investing in HS or HR, and you expect the interest rate goes
down next year. Which bond will you invest and why?
c) Compared to equity, what would be the advantages of debt financing for
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