You have decided to refinance your mortgage. You plan to borrow whatever is outstanding on your current mortgage. The current monthly payment is $2 356 and you have made every payment on time. The original term of the mortgage was 30 years, and the mortgage is exactly four years and eight months old. You have just made your monthly payment. The mortgage interest rate is 4.250% (APR). How much do you owe on the mortgage today? (Note: Be careful not to round any intermediate steps to fewer than six decimal places.) The amount you owe today is $. (Round to the nearest dollar.) In a particular year interest rates were 7.85% and the rate of inflation was 12.3% in Australia. a. What was the real interest rate that year? b. How would the purchasing power of your savings have changed over the year? a. What was the real interest rate that year? Real rate of interest was %. (Round to two decimal places.) b. How would the purchasing power of your savings have changed over the year? The purchasing power over that year did the following: A. Increased by 4.45% B. Increased by 3.96% C. Declined by 4.45% D. Declined by 3.96% What is the shape of the yield curve given in the following term structure? What expectations are investors likely to have about future interest rates? 1 year 2 years Term Rate (%) 3 years 2.74 5 years 3.33 7 years 3.76 10 years 4.15 20 years 4.96 2.02 2.43 What is the shape of the yield curve given the term structure? (Select the best choice below.) O A. The yield curve is an inverted yield curve (decreasing). B. The yield curve is a flat yield curve. O C. The yield curve is a normal yield curve (increasing). OD. It is hard to tell because we are not given an EAR for every year. What expectations are investors likely to have about future interest rates? (Select the best choice below.) A. Interest rates might rise in the future. B. The yield curve provides no clues as to future interest rate levels. O C. Interest rates might decrease in the future. OD. Interest rates will likely stay the same in the future. You are the CFO of a firm. You are evaluating a potential project for investment, which is similar to other projects that the firm undertakes. The project will cost $1 million in initial outlay. The firm has $1 million in cash available for investment, which is currently in a bank account earning 2% interest. What is the appropriate discount rate (cost of capital) to use in evaluating the project? (Choose the correct response.) A. Since the firm already has the cash and doesn't need to raise it from external sources, the opportunity cost of capital is zero. B. The opportunity cost of capital is the best rate of return currently available from the potential projects that the firm currently has to choose from. C. Since the firm will lose 2% in interest if it uses the cash, the opportunity cost of capital is 2%. D. The opportunity cost of capital is the required rate of return for investors to invest in the firm