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I have no clue how to do this and I have a midterm that will be on this material. BUSI330 Principle of Finance Information: a.

I have no clue how to do this and I have a midterm that will be on this material.

image text in transcribed BUSI330 Principle of Finance Information: a. Answer all questions. b. Always explain your answers with clear statements. 1. You're buying a house that costs $670,000 now. The down payment you put in is $134,000. The mortgage is a 30-year 3.6% loan with no pre-payment penalty. Answer the following questions; a) What is the monthly mortgage payment that you need to pay? b) Suppose you stay in this house for 10 years already, what is the balance of the loan that you still owe? Is this balance the same as the present value of an annuity for the remaining mortgage payments? c) Show the amortization table for the mortgage monthly payments of the first year. (Notice that you need to do it month by month not just the annual payment). d) Following the information from b), if the current mortgage is as low as 2.2%, and you decide to refinance the mortgage for the remaining principal with a 15-year mortgage, how much is your monthly payment now? 2. You are given with a 10-year coupon bond with 6.8% coupon rate on the face value as $1,000 and with semi-annual payments. Answer the following questions: a) Suppose the discount rate for the bond is given as 12.6%, what is the present value of the bond? b) Suppose you only want to hold the bond for three years only, what is the expected bond price when you are about to sell it at the end of third year? c) Suppose at the end of the third year, the bond price is actually $896, what is your annual rate of return in the 3-year holding period? 3. Suppose Company X issues a common stock with current dividend as $2.65/per share. The expected growth rate for the dividends is said to be 6%. Let the current market price of the stock be $18.50/per share. a) What is the discount rate for this stock if the market is fair and does not allow any arbitrage opportunity? b) Suppose you own the stock now. Let's assume that you plan to hold the stock for 4 years only. What is your expected re-sell price for the stock? c) There is another common stock issued by Company Y in the market. The current dividend for Company Y's stock is $3.20/per share. The current Company Y's stock price is $21.25/per share. Suppose this stock's discount rate is the same as that in question a) of problem 3. What is the growth rate of this stock's dividends? 4. What are the pros and cons of ratio analysis in analyzing the firm

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