QUESTION 5: Consider a floating rate mortgage loan of $300,000 for the amortization period of 16 years. Assume monthly mortgage payments and the mortgage rate reset every six months as follows: Mortgage rate = The prime rate +3.0% The loan contract specifies that the prime rate used in each reset period will be one that will be prevailing at the beginning of the reset period. Assume that at the time of the loan, the prime rate is 3.6%, while after six months, it will become 4.2%. Also, assume monthly compounding of the mortgage rate Calculate monthly mortgage payments in each of the initial six months of the mortgage loan and in each of the subsequent six months. (3 marks) QUESTION 8 Assume the following current information: (1) The deposit rate on euro-yen 6-month deposits = 3% per annum (ii) The deposit rate on Cdn $ 6-month deposits - 4% per annum (iii) The 6-month forward exchange rate: 1.0 - C$ 0.0125 (iv) The current spot exchange rate: 1.0 - C$ 0.0120 Do the given data satisfy the interest rate parity? If there is a covered interest arbitrage opportunity, find arbitrage profit for transaction size of C$ 1.0 million or X 83.33333 million. (3 marks) QUESTION 4: I The People's Insurance Ltd. is selling a 25-year annuity contract that will pay the annuitant $4,000 at the end of each month during the next 15 years and thereafter it will pay $3,000 at the end of each month during subsequent 10 years. The relevant annual interest rate of this annuity is 6% throughout, compounded monthly. Ms. Miller wants to buy the contract offered by the Peoples' Insurance. What is the maximum price she be willing to pay to buy the annuity contract