The President of ZEUS Bank is offering you the financial analyst position because she

admires your knowledge and your character. Prove to her that you know how to fix an

amortization schedule given that the loan amount is L= $90,000 dollars, the interest rate is

6% and the time-period is five years, respectively.

a. Show all your calculations analytically. What do you observe from your amortization schedule?

b. Is this loan an Annuity? What kind of an Annuity?

Question 2:

a. Consider a five-year bond issue by Financial Institution HERMES of Oakland California. The Face Value of the bond is $1,000 dollars, the coupon rate of the bond is 9% and the ongoing market interest rate is 5%. Calculate the Value of the Bond by using both the Timeline and the Tables methods, the Current Yield, the Yield to Maturity and the Capital Gains Yield, respectively.

b. Economic conditions change in the country and the ongoing rate of interest increases to 10%. Calculate the value of the bond the Current Yield, the Yield to Maturity and the Capital Gains Yield, respectively.

c. What is the relationship between interest rates and the Value of the Bond? Show the time path of the bond over time. Explain, your answers clearly.