You can afford a $1250 per month mortgage payment. You've found a 30 year loan at 6% annual interest compounded monthly.

a) How big of a loan can you afford?

b) How much total money will you pay the loan company?

c) How much of that money is interest?

2.How much would you need to deposit in an account each month in order to have $40,000 in the account in 8 years? Assume the account earns 8% annual interest compounded monthly.

3.A corporate bond was issued a few years ago at face value of $1,000 with a YTM of 7% and quarterly paid coupons. Now with 12 years left until the maturity, the company has run into hard times and the yield to maturity has increased to 15%.

1) What is the bond price now?

2) Suppose the company defer the loss to future and will make good on the promised coupon payments. However, the deferred loss will finally drive the company out of business at the maturity of this bond. It's estimated that investors will lose all the face value with a probabilty of 30%, receive 50% of the face value with a probability of 40%, and 80% of the face value with 30% probability. What is the expected value investors will receive at maturity?

3Given the calculated expected value received at maturity, how should investors adjust their estimate of the YTM?

4.A company has been making snowboards for many years. The monthly overhead is $32,600 and each snowboard costs $379 in materials and labor to make. If these items are sold for $433

(a) How many snowboards must be sold to break even?

(b) What is the profit in dollars if 107 snowboards are made and sold?

5.Henry buys a large boat for the summer, however he cannot pay the full amount of $32,000 at once. He puts a down payment of $14,000 for the boat and receives a loan for the rest of the payment of the boat. The loan has an interest rate of 5.5% and is to be paid out over 4 years. What is Henry's monthly payment, and how much does he end up paying for the boat overall?

6.The Jameses take out a mortgage on their $470,000 home. The mortgage has an interest rate of 4.6% and is amortized over 30 years by making monthly payments. How much will the James be paying each month on their home mortgage?

7.In April 2014, Greece managed to sell some 3 billion in new five-year bonds at a yield of just 4.95%.

Answer the following questions (show all calculations):

Suppose a coupon of 4.75% (assume that each bond pays interest annually) and the actual yield to maturity (YTM) of 4.95%.

Suppose that an investor holds the bond of the above question for two years expecting that by the end of this period the YTM will have dropped to 2.6%, which was the YTM of the Portuguese sovereign debt of the same maturity in April 2014. What is the anticipated return of the investment (to calculate the overall profit you should take into considerationboththe capital gains from the fall in the YTMandthe coupons that have been paid)?

8.You would like to set up an annuity so that, after you retire, you can take out the interest from the maturity value every month to pay living expenses (you predit that you will need $1200 every month). If you start saving 20 years before retirement into an account paying 6% interest, how large of a monthly payment will you need to make?

9.An investment of $8,000 is made at 3.5% interest for 8 years. Determine the maturity value (rounded to the nearest penny) in each of the following cases.

(a) Simple interest is used.

(b) The interest is compounded annually.

(c) The interest is compounded continuously.

10.Suppose a company has an advertising of $880000 in 2016, which represent 35% of their total revenue. What is the total revenue?