Question
5a) Which one(s) of the statements below is false about conventional mortgages? I. Mortgage loan balance in a given month is reduced by the amount
5a) Which one(s) of the statements below is false about conventional mortgages?
I. Mortgage loan balance in a given month is reduced by the amount of the monthly mortgage payment.
II. The future value of the mortgage payments is zero.
III. The mix of interest and principal portions of the mortgage payments change through time.
IV. Once the last payment is made, there is no principal balance left to pay to the bank.
b) You read in a financial newspaper that investors are paying $6.25 for every dollar of earnings for ABC company's stock. This implies that
c)In 20X1, the market-to-book ratio for ABC Inc. was 2.1. In 20X2, the company reported a record net income (positive amount), but did not pay any dividends. Assuming that the stock price in 20X2 was the same as that in 20X1, what would happen to the market-to-book ratio in 20X2? Assume that the relevant items on the 20X2 balance sheet and the 20X2 income statement reflect this record profit and the dividend decision, and there is no change in shares outstanding.
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