Complete an amortization schedule for a $25,000 loan to be repaid in equal installments at the end of each of the next 3 years The interest rate is 10 compounded annually If an amount is zero, enter 0 Do not round intermediate calculations Round your answers to the nearest cent Beginning Repayment Remaining Year Balance Payment Interest of Principal Balance 1 $ $ $ $ $ 2 3 What percentage of the payment represents interest and what percentage represents principal for each of the 3 years Do not round intermediate calculations Round your answers to two decimal places Interest Principal Year 1 Year 2 Year 3 Why do these percentages change over time These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance declines These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance declines These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance increases These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance increases These percentages do not change over time interest and principal are each a constant percentage of the total payment Icon Key 2 Stocks A and B have the following probability distributions of expected future returns Probability A B 0 1 (5 ) (33 ) 0 2 4 0 0 4 11 22 0 2 23 26 0 1 36 35 Calculate the expected rate of return, , for Stock B ( 12 90 ) Do not round intermediate calculations Round your answer to two decimal places Calculate the standard deviation of expected returns, A , for Stock A ( B 18 94 ) Do not round intermediate calculations Round your answer to two decimal places Now calculate the coefficient of variation for Stock B Do not round intermediate calculations Round your answer to two decimal places Is it possible that most investors might regard Stock B as being less risky than Stock A If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense Assume the risk free rate is 1 5 What are the Sharpe ratios for Stocks A and B Do not round intermediate calculations Round your answers to four decimal places Stock A Stock B Are these calculations consistent with the information obtained from the coefficient of variation calculations in Part b In a stand alone risk sense A is more risky than B If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense In a stand alone risk sense A is less risky than B If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense In a stand alone risk sense A is less risky than B If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense In a stand alone risk sense A is less risky than B If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense In a stand alone risk sense A is more risky than B If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense 3 Nesmith Corporation's outstanding bonds have a $1,000 par value, a 12 semiannual coupon, 9 years to maturity, and a 14 YTM What is the bond's price Round your answer to the nearest cent $

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Complete an amortization schedule for a $25,000 loan to be repaid in equal installments at the end of each of the next 3 years. The

Complete an amortization schedule for a $25,000 loan to be repaid in equal installments at the end of each of the next 3 years. The interest rate is 10% compounded annually. If an amount is zero, enter "0". Do not round intermediate calculations. Round your answers to the nearest cent.

	Beginning			Repayment	Remaining
Year	Balance	Payment	Interest	of Principal	Balance
1	$	$	$	$	$
2
3

What percentage of the payment represents interest and what percentage represents principal for each of the 3 years? Do not round intermediate calculations. Round your answers to two decimal places.

	% Interest	% Principal
Year 1:	%	%
Year 2:	%	%
Year 3:	%	%

Why do these percentages change over time?

These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance declines.
These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance declines.
These percentages change over time because even though the total payment is constant the amount of interest paid each year is declining as the remaining or outstanding balance increases.
These percentages change over time because even though the total payment is constant the amount of interest paid each year is increasing as the remaining or outstanding balance increases.
These percentages do not change over time; interest and principal are each a constant percentage of the total payment.

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2. Stocks A and B have the following probability distributions of expected future returns:

Probability	A		B
0.1	(5	%)	(33	%)
0.2	4		0
0.4	11		22
0.2	23		26
0.1	36		35

Calculate the expected rate of return, , for Stock B ( = 12.90%.) Do not round intermediate calculations. Round your answer to two decimal places.

Calculate the standard deviation of expected returns, _A, for Stock A (_B = 18.94%.) Do not round intermediate calculations. Round your answer to two decimal places.

Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places.

Is it possible that most investors might regard Stock B as being less risky than Stock A?

If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense.
If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense.

Assume the risk-free rate is 1.5%. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculations. Round your answers to four decimal places.

Stock A:

Stock B:

Are these calculations consistent with the information obtained from the coefficient of variation calculations in Part b?

In a stand-alone risk sense A is more risky than B. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
In a stand-alone risk sense A is less risky than B. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense.
In a stand-alone risk sense A is less risky than B. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
In a stand-alone risk sense A is less risky than B. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
In a stand-alone risk sense A is more risky than B. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.

3. Nesmith Corporation's outstanding bonds have a $1,000 par value, a 12% semiannual coupon, 9 years to maturity, and a 14% YTM. What is the bond's price? Round your answer to the nearest cent.