5. Take another look at Problem \#1. Despite your calculation in Problem \#1, you went ahead and paid $11,000 for the bond. You hold it for one year, and then decide to bail out, selling it for $11,110. a. What was your ROR1yr ? b. What was the current yield on the bond? c. Challenge Question: What must have happened to interest rates during the year you held the bond? 6. You can't afford a car, so you're going to buy a Yamaha 125 trail bike to get back and forth to school on. (Seriously? Have fun riding it in February!) IAnyway, it's affordable and gets much better mileage than a car. The one you have in mind is about ten years old, but the price is right: $2500. With such a low price you figure you can pay it off quickly, so you decide go for a three-year bank loan to be paid for in annual instalments, at 12%. (Whoa...12\%? Yeah, sorry, but unfortunately you don't have much of a credit history.) a. First, tell me what your annual payments will be. b. Second, set up and fill in an amortization schedule with these six columns: 1) Year 2) Principle Balance (at beginning of year) 3) Annual Mortgage Payment 4) Interest Paid 5) Amortization Payment (which is applied to the outstanding principle) 6) Principle Balance (at end of year) (Try to do this without looking at your notes!) 7. An undergraduate team in ADM 1313 (Principles of Marketing) has proposed remodelling the Lady Beaverbrook Gym and turning it into an avocado toast and pea protein smoothie bistro with seating for 1000 . The plan is to gut the building and make it just one floor with 60 foot ceilings. Large and airy. It will cost a chunk of dough, though, something like $1,850,000. Asked to comment on the proposals a local Fredericton consulting firm figures the bistro might be able to attract as many as 12 people per day for lunch and for dinner, and might turn a profit of about $11,500 per year. With these kinds of numbers, how long will it take UNB to earn back the big initial outlay? (A timeline is optional for this problem; no discounting is necessary or even asked for-just calculate the simple payback period.) 8. Now consider a different ADM 1313 team proposing a faculty and staff dining hall on the third floor of Carleton Hall, which may be vacated at some point in the next few years. Some walls will need to be taken out, some rewiring will be necessary, and of course kitchen equipment (costly!) will need to be purchased, along with tables and chairs. The estimated price tag: $650,000. However, profits can be expected to be $155,000/yr. Calculate the precise discounted payback period, assuming a discount rate of r=7%. (A timeline with a vertical running-total column is required for this problem; you can round to the nearest dollar in your calculations if you want to.) 5. Take another look at Problem \#1. Despite your calculation in Problem \#1, you went ahead and paid $11,000 for the bond. You hold it for one year, and then decide to bail out, selling it for $11,110. a. What was your ROR1yr ? b. What was the current yield on the bond? c. Challenge Question: What must have happened to interest rates during the year you held the bond? 6. You can't afford a car, so you're going to buy a Yamaha 125 trail bike to get back and forth to school on. (Seriously? Have fun riding it in February!) IAnyway, it's affordable and gets much better mileage than a car. The one you have in mind is about ten years old, but the price is right: $2500. With such a low price you figure you can pay it off quickly, so you decide go for a three-year bank loan to be paid for in annual instalments, at 12%. (Whoa...12\%? Yeah, sorry, but unfortunately you don't have much of a credit history.) a. First, tell me what your annual payments will be. b. Second, set up and fill in an amortization schedule with these six columns: 1) Year 2) Principle Balance (at beginning of year) 3) Annual Mortgage Payment 4) Interest Paid 5) Amortization Payment (which is applied to the outstanding principle) 6) Principle Balance (at end of year) (Try to do this without looking at your notes!) 7. An undergraduate team in ADM 1313 (Principles of Marketing) has proposed remodelling the Lady Beaverbrook Gym and turning it into an avocado toast and pea protein smoothie bistro with seating for 1000 . The plan is to gut the building and make it just one floor with 60 foot ceilings. Large and airy. It will cost a chunk of dough, though, something like $1,850,000. Asked to comment on the proposals a local Fredericton consulting firm figures the bistro might be able to attract as many as 12 people per day for lunch and for dinner, and might turn a profit of about $11,500 per year. With these kinds of numbers, how long will it take UNB to earn back the big initial outlay? (A timeline is optional for this problem; no discounting is necessary or even asked for-just calculate the simple payback period.) 8. Now consider a different ADM 1313 team proposing a faculty and staff dining hall on the third floor of Carleton Hall, which may be vacated at some point in the next few years. Some walls will need to be taken out, some rewiring will be necessary, and of course kitchen equipment (costly!) will need to be purchased, along with tables and chairs. The estimated price tag: $650,000. However, profits can be expected to be $155,000/yr. Calculate the precise discounted payback period, assuming a discount rate of r=7%. (A timeline with a vertical running-total column is required for this problem; you can round to the nearest dollar in your calculations if you want to.)
