Question 1 O out of 5 points A 10year $500 Par (face) value callable bond with annual coupons may be redeemed at the Par (face) value by the bond issuer at any X coupon date from the 7th coupon until the 10th coupon.(i.e. can be redeemed at t=7,8,9, or 10). The coupon rate is an annual effective rate of 5%. Determine the price of the bond if the purchaser desires a minimum yield of 5.7%. Hint: determine if the bond is bought at a premium or discount and that will indicate when then bond will be redeemed and the price will be based off the corresponding redemption date. Question 2 O out of 5 points A loan of $23,547.76 is to be repaid with 10 annual payments at the end of each year. The interest rate is an annual effective rate of X 5%. The first payment is $1000. Each succeeding payment is increased by $500 (with the last payment being $5500 at t=10). Determine the amount of principal in the 5th payment. Hint: You can use either the retrospective method to find Balances. Note: P5=B4 - B5 so you will need to find two balances. Also note the payment structure is a (PQ) annuity so the formula for principal for level payments will not work. As the number of payments is small, you may also choose to "brute force" the answer. Question 3 O out of 5 points A loan is to be repaid with n=10 payments. The interest rate on the loan is an annual effective rate of 6.7%. The payments are made at x the end of each year. The first payment is $1000. Each successive payment is increased by 10% (so the last payment will be 1000*1.19 = 2,357.95). Determine the amount of interest in the 3rd payment. Hint: Find the balance at t=2 then use 13 = B2*i. Also note that the "real" rate of interest will be negative. Question 4 O out of 5 points A loan of $91.97 is to be repaid two payments of $70. The first payment is made at time t=5. The interest rate is an annual effective rate X of 5%. Determine the time of the second payment. Hint: This will not involve annuities. Let n be the time of the second payment. Use that the original loan amount is equal to the sum of the present values of the the two payments and solve for n algebraically. Question 5 O out of 5 points A 10-year bond with quarterly coupons has a face (par) value of $500. The nominal annual coupon rate is 7.2% compounded X quarterly. The redemption value is $525. The nominal annual yield rate is 6.0% compounded quarterly. Determine the price of the bond. Question 6 0 out of 5 points A settlement for a workers compensation claim has to pay he injured party an annual salary at beginning of each year for 20 years (last X payment at t=19). The first payment at time t=0 is $40,000. Each succeeding payment must include a "cost of living adjustment". Conse quently, each succeeding payment is increased by 4% over the previous payment. The insurance company's reserve account earns an annual effective rate of interest of 5.560%. Determine the claim reserve that should be set at time t=0.(i.e. find the present value of the geometric annuity where there inflation rate is 4% and the yield (interest) rate is 5.560%). Hint: You can use the "real" interest rate to help you solve this problem. Question 1 O out of 5 points A 10year $500 Par (face) value callable bond with annual coupons may be redeemed at the Par (face) value by the bond issuer at any X coupon date from the 7th coupon until the 10th coupon.(i.e. can be redeemed at t=7,8,9, or 10). The coupon rate is an annual effective rate of 5%. Determine the price of the bond if the purchaser desires a minimum yield of 5.7%. Hint: determine if the bond is bought at a premium or discount and that will indicate when then bond will be redeemed and the price will be based off the corresponding redemption date. Question 2 O out of 5 points A loan of $23,547.76 is to be repaid with 10 annual payments at the end of each year. The interest rate is an annual effective rate of X 5%. The first payment is $1000. Each succeeding payment is increased by $500 (with the last payment being $5500 at t=10). Determine the amount of principal in the 5th payment. Hint: You can use either the retrospective method to find Balances. Note: P5=B4 - B5 so you will need to find two balances. Also note the payment structure is a (PQ) annuity so the formula for principal for level payments will not work. As the number of payments is small, you may also choose to "brute force" the answer. Question 3 O out of 5 points A loan is to be repaid with n=10 payments. The interest rate on the loan is an annual effective rate of 6.7%. The payments are made at x the end of each year. The first payment is $1000. Each successive payment is increased by 10% (so the last payment will be 1000*1.19 = 2,357.95). Determine the amount of interest in the 3rd payment. Hint: Find the balance at t=2 then use 13 = B2*i. Also note that the "real" rate of interest will be negative. Question 4 O out of 5 points A loan of $91.97 is to be repaid two payments of $70. The first payment is made at time t=5. The interest rate is an annual effective rate X of 5%. Determine the time of the second payment. Hint: This will not involve annuities. Let n be the time of the second payment. Use that the original loan amount is equal to the sum of the present values of the the two payments and solve for n algebraically. Question 5 O out of 5 points A 10-year bond with quarterly coupons has a face (par) value of $500. The nominal annual coupon rate is 7.2% compounded X quarterly. The redemption value is $525. The nominal annual yield rate is 6.0% compounded quarterly. Determine the price of the bond. Question 6 0 out of 5 points A settlement for a workers compensation claim has to pay he injured party an annual salary at beginning of each year for 20 years (last X payment at t=19). The first payment at time t=0 is $40,000. Each succeeding payment must include a "cost of living adjustment". Conse quently, each succeeding payment is increased by 4% over the previous payment. The insurance company's reserve account earns an annual effective rate of interest of 5.560%. Determine the claim reserve that should be set at time t=0.(i.e. find the present value of the geometric annuity where there inflation rate is 4% and the yield (interest) rate is 5.560%). Hint: You can use the "real" interest rate to help you solve this