I could use help on number 8 of attached file. Please show all work so I can see thought process.

FIN 317 Problem Set #3 Due: October 26, 2016 1. You borrowed $36,000 at 10% APR to buy a car, and you have to make equal monthly payments for 60 months, starting next month. What is the fixed monthly payment you will have to make? Write out the amortization table for this loan for the first three months of the loan. [Use the exact same format for the table that we used in class.] 2. Calculate the price of a 5.5% coupon bond with 23 years left to maturity and a market interest rate of 7.5%. Assume interest payments are semiannual. Is this a discount or a premium bond? Why or why not? 3. Consider a bond with 15 years left to maturity. It is a 5.35% semi-annual coupon bond that is selling for $1,025.35. a. What yield to maturity is the bond offering? b. Suppose the bond is callable in 6 years with a call price equal to the par value plus 2 semi-annual interest payments. What is the yield to call? 4. Quick Loans (a pay day loan company) offers you \"three for four or 1 knock on your door.\" This means you get $3 today and have to repay $4 when you get your paycheck in one month (or else you get the \"knock on your door,\" which we can assume will be unpleasant). [Note: Large numbers are OK.] a. If you were brave enough to ask, what APR would the lender (Quick Loans) say you were paying? b. What is the effective annual return the lender (Quick Loans) earns on this lending business (the lender loans $3 today and gets $4 in one time period)? 5. A 6.25% coupon bond with 20 years left to maturity is priced to offer a 5.5% yield to maturity. You believe that in one year, the yield to maturity will be 6.125%. If this occurs, then what would be the return of the bond in dollars (i.e., if you buy it now and sell it in one year, then how much money would you get)? Notes: (i) you are not being asked for a return percentage; rather you need to calculate the amount of money you will receive in dollars; (ii) assume interest payments are semiannual and (iii) use the following definition for return: the return is equal to the change in value plus any interest, i.e. Return of bond in dollars = change in value plus interest earned in a year. [Please set your calculator to display 4 decimal places.] 6. Consider a 15-year bond that has a 6.25% coupon, paid semiannually. If the current market interest rate is 6.6%, and the bond is priced at $950, should you buy this bond? Hint: For this problem we are relaxing the assumption that the price of the bond must equal the value of the bond. You are given the price. So you must compute the value and then explain why you would or would not buy the bond (using the relationship between the bond's price and value as your reasoning). For example, if the value of a bicycle is $100, but its price (or cost) is $150, then you would keep walking to school, i.e. you would NOT buy the bike because it is overvalued (price > value). 7. A 20-year corporate bond has a par value of $1000 and a 9% annual coupon rate. Assume that your required rate of return is 10% and that you plan to hold onto this bond for 5 years. You and the market have expectations that in 5 years the yield-to-maturity for this bond (or another bond with similar risk and maturity) will be 8.5%. How much are you willing to pay for this bond today? (Hint: You will need to know how much you can sell the bond for at the end of 5 years. Then you must use this value to determine how much you would be willing to pay for it today! So, Step 1 is to find the value of the bond in 5 years -> N=15,...) 8. Fill in the following table. Consider two, nearly identical bonds. Each are issued by the US Government, have a principal of $1000, pay coupons semiannually, and have a coupon of 2%. One bond matures in 5 years, the second 10 years. What is the value of each bond, if the yield is 2%? What is the value of each bond if the yield increases to 3%? What is the percentage decline in value for each bond's price between 2% and 3% yield? Which bond is more sensitive to interest changes? (Sensitive means which bond's price changes more in percentage terms with the same change in yield?) Bond 5-yr Treasury, 2% coupon 10-yr Treasury, 2% coupon Price if yield is 2% Price if yield is 3% % change in price between 2% yield and 3% yield (i.e. {3%-2%}/2%}