Homework 2 1. You take out a loan for a $4,000,000 20-years annual payment loan with an interest rate of 11.2%. What is the annual PMT? How much interest is paid total at the end of 20 years? 2. Daniel invests $5,000 today into an investment account. Five years from today, he will begin investing $3,000 every year for ten years. He will then invest $6,000 for the five years after that. With an annual compounding interest rate of 3%, what is the valuation in the account twenty years from today? 3. Craft Inc. strikes a 30-year contract deal with IT consulting firm, Credible Data Systems. The project is that Craft Inc. pays $1,500,000 today. Credible will go ahead and update the IT infrastructure systems to be modern at Craft. At the end of 30 years, Craft will pay an additional, final closing cost of $1,500,000 to Credible. The system will be reupdated every 5 years and Credible will do it for $500,000 every time. Every time the infrastructure is updated, the following year will see a cost savings of $285,000. The savings will also increase by 1% every year. Lastly, Credible will charge an annual subscription cost to its servicing of $35,000. Craft Inc. management has deemed the required rate of return for this investment to be 15.1%. After 30 years, what is the NPV? Show a table of cash flows and respective present values. What is the IRR here? 4. Show the bond schedule for a 9% semi-annual coupon bond with a YTM of 10.4%. The par value is $1,000 and bond matures after 18-years. What is it worth today? What is the MaCaulay Duration here? If the bond is callable and is called after 10 years for a price of $1,050. What is the Yield-to-Call?