Company X needs to purchase a new company car.  The company has $50,000 in cash but the car costs $68,500.  If you Company X can earn 9% interest on a two year investment, how much would it have to invest today to buy the car in two year?  Will Company X's investment be sufficient?  Why or why not?  Assume the price of the car will remain the same. (7 points 5/2)
N =

I =

PV =

PMT =

FV =

P/Y =

 
2. Z  Corp. plans to purchase a $650,000 building.  Z Corp. will put 20% down and borrow the balance from Santander Bank.  It borrows the money on a 30-year loan with an APR of 6.5%.  (16 points 5/5/6)

What is the building's monthly mortgage?
N =

PMT =

FV =

I =

PV =

P/Y =

 Five years later, what is the balance on the loan?
N =

I =

PV =

PMT =

FV =

P/Y =

In the first five years, how much interest did you pay?
   Total payments

   Principle          

   Interest            

3. XYZ Company borrows $450,000 to purchase a piece of capital equipment.  The term of the loan is 20 years at an APR of 6.5%.

 What is the monthly payment?  (20 points 5/5/5/5)
N =

I =

PV =

PMT =

FV =

P/Y =

After five years, APR falls to 4.75%.  How much is the balance due on the loan?
              N =

              I =

              PV =

              PMT =

              FV  =

              P/Y =

  How much of the loan principle has XYZ Company paid off during the first five years?
               

  After five years,  XYZ realizes the machinery has a longer productive life than originally estimated; what would the loan payment be if it took out a new 20 year
loan?

              N =

              I =

              PV =

              PMT =

              FV =

              P/Y =

 
4. The Nickelodeon Manufacturing Corp. has a series of $1,000 par value bonds outstanding. Each bond pays interest (coupon payment) semi-annually and carries an annual coupon rate of 6%.  Some bonds have a maturity date of  4 years and some have a maturity date of 10 years.  If the YTM is 10%, what is the current price of:

Round your answers to 2 decimal points:

The bonds with 4 year maturity
 The bonds with 10 year maturity
Are the bonds selling at a discount, at par, or at a premium? Briefly explain.
Which of the bonds has a higher selling price under the current market conditions? Briefly explain.
 

4 year bond                         10 year bond                                  

N =                                               N =

I =                                     I =

PV =                                      PV =

PMT =                               PMT =

FV =                                             FV =

P/Y =                                      P/Y =