Questions 1 8. 2 are to be done using Excel - Total Payment; Interest Payment and Principal Payment are to be calculated using the financial functions in excels. Grades will assigned based on the use ofthese formulas Question 1 Michael Brooks is buying a house for $2 000 000. He made an agreement with the National Housing Trust (NHT) to provide 45% financing for his new home. It was agreed with the NHT that he will make monthly payments over five [5) years at 12% per annum. The remainder of the funds required to cover the cost of the house will be borrowed from his commercial bank. The terms of the agreement for the bank loan are, 25% down payment, and the balance is to be repaid at 20% interest over a three [3) year period. a. Calculate the monthly payments to be paid over to the National Housing Trust (NHT) if payments are made at the end of each month. [5 marks] b. Calculate the annual end of year payments to be paid to the commercial bank. [6 marks] c. Considering part (b), prepare the amortization schedule for this loan. [9 marks] (CCCJ) Question 2 Carona has just taken a loan at an annual rate of15%. She plans to repay it over 2 years, paying $52 250 at the beginning of each monthly. a. How much did Carona borrow?I [5 marks] b. Prepare the loan amortization schedule [12 marks] 0. If payments are made at the end of each month, what is the effective annual rate of the loan? [3 marks] Question 3 The Plush Corporation is planning on expanding its operations and decides to fund this by issuing a new series of bonds on January 1, 2020. The 10% coupon bonds will be sold at par ($1 200), and will mature on December 31, 2044. Coupon payments are made semi-annually. a. What will be the YTM of Plush's bonds on January 1, 2020? [2 marks] b. What will be the price of the bond on January 1, 2027, given interest rates is expected to fall to 7 T J L 8%? [5 marks] c. Find the expected current yield and expected capital gains yield on the bond on January 1. 2027, given the price as determined in Part 'b' above [6 marks] d. If Plush Corporation bonds are expected to be sold for $1 100 on July 1, 2037, what is the expected rate of return on that date? [6 marks] e. What would be expected current yield and expected capital gains yield on July 1, 2037? [6 marks] f. Would you buy Plush bonds when they are selling for $1 100 if you require a rate of return of 13% per year. (Show calculations to support your answer) [10 marks] 3. Calculating GDP using national income account data The following table shows data on consumption, investment, exports, imports, and government expenditures for the United States in 2006, as published by the Bureau of Economic Analysis. All figures are in billions of dollars. Fill in the missing cells in the following table to calculate GOP. Components Personal consumption expenditures (C) $9,224.5 Gross private domestic Investment (1) $2,209.2 Government consumption expenditures and gross Investment (G) $2,523 Exports (X) $1,467.6 Imports (M) $2,229.6 Net exports of goods and services (NX) Gross domestic product (GDP) This method of calculating GDP, which Involves summing the is called the approach.4 Exercise 4. ('35 points) lConsider a pure-exchange economy with two goods {1, 2} and two consumers {A, B}. A and B wish to trade with one another to maximize their individual utilities. Slippose A is endowed with 1 unit of good 1 and half a unit of good 2, i.e., MA = (1, i)- B is endowed with 1 unit of good 1 and 1.5 units of good 2, i.e., MB 2 (1, g]. In addition, suppose their utility functions are given by was) = ease var-B) = arrears\" [1} Draw an Edgeworth box indicating the endowment and preferences for this problem. [2) Find the set of Pareto optimal allocations of this economy. [3} Find the equilibrium consumptions of A and B and determine the equilibrium price ratio that Supports them. [4} Is the equilibrium allocation in [3} Pareto optimal? {5) Show that there are gains from trade in this situation (compared to the endowment point]. From what endowment point leading to the same equilibrium allocation would there be no gains from trade? [6} Suppose that instead of the above utility function, u3(:-:B') = (1."? )3!I 3(32'? )1! 8. How does this change the equilibrium consumption you found in part (3)? What is the intuition for this? [7) Go back to the original problem. Suppose the government decides that the competitive equilibrium is not a good allocation and they would prefer for A and B to consume respectively (E, 3,.) and (E, 2). Is this a competitive equilibrium for some endowments? 1Why or why not? Is it attainable from the initial endowments? [8) Suppose that the government can announce that 111 = p2 = 1. 1Would this achieve the government's dmired allocations? [9) Could the government achieve its objective through lump sum redistribution [i.e., a change of the initial endowments such that there are still 2 units of each good in this economy}? If so, how could it redistribute to achieve its desired allocation