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Today is T=0. You borrow $200,000 today at a rate of interest of 6%. You agree to repay the loan in 4 equal, annual installments.

  1. Today is T=0. You borrow $200,000 today at a rate of interest of 6%. You agree to repay the loan in 4 equal, annual installments. The first payment is to be made at T=1. What is the amount of the principal reduction associated with the third payment?
  2. Today is T=0. A company paid a dividend of $2.40 yesterday. Dividends are expected to grow at a rate of 10% for three years, 8% for one year and then at a rate of 6%, forever. The required return is 13% and is never expected to change. Estimate the equilibrium price of a share of stock at T=0.
  3. Today is T=0. A bond has a 6% coupon rate, annual payments and 8 years until maturity. If the bond sells for $8339554 what is your capital gain yield between T=6 and T=7.

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