Question 4

Suppose that a mortgage of $200,000 is to be repaid over 20 years at an annual interest rate of 5%. Using the formula for calculating the present value of an annuity of n periods, find the fixed yearly payment to pay off the loan in 20 years. Show all the steps of your calculations to get full marks.

Question 5

Suppose a Government of Canada zero-coupon bond can be purchased for $3816.31 at the end of 2005. At maturity, in seven years, the investor receives $6987.50. What is the yield to maturity on this zero-coupon bond?

Question 6

Suppose you are given the following data about a T-bill: Face value $1,000,000, current price $979,644, days to maturity, 80. What is the effective annualized yield on this T-bill if held until maturity?

Question 7

What is the yield to maturity on a simple loan for $1 million that requires a repayment of $2 million in 5 year's time?

Question 8

If the interest rate is 10%, what is the present value of a security that pays you $1100 next year, $1210 the year after, and $1331 the year after that?