You have just borrowed $240,000 to buy a condo. You will repay the loan in equal monthly payments of $3,160.29 over the next 20 years.

a. What monthly interest rate are you paying on the loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b. What is the APR? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. What is the effective annual rate on that loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

d. What rate is the lender more likely to quote on the loan?

A retiree wants level consumption in real terms over a 25-year retirement. If the inflation rate equals the interest rate she earns on her $360,000 of savings, how much can she spend in real terms each year over the rest of her life?

A bond with a face value of $1,000 has 12 years until maturity, has a coupon rate of 7.4%, and sells for $1,107.

a. What is the current yield on the bond? (Enter your answer as a percent rounded to 2 decimal places.)

b. What is the yield to maturity if interest is paid once a year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.)

c. What is the yield to maturity if interest is paid semiannually? (Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.)

A 30-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 8.40%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places.)

a. What is the yield to maturity if the bond is selling for $1,060?

b. What is the yield to maturity if the bond is selling for $1,000?

c. What is the yield to maturity if the bond is selling for $1,050?

Consider three bonds with 5.60% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years.

a. What will be the price of the 4-year bond if its yield increases to 6.60%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Consider two bonds, a 3-year bond paying an annual coupon of 5.30% and a 10-year bond also with an annual coupon of 5.30%. Both currently sell at a face value of $1,000. Now suppose interest rates rise to 9%.

a. What is the new price of the 3-year bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. What is the new price of the 10-year bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. Which bonds are more sensitive to a change in interest rates?

• Long-term bonds
• Short-term bonds

b. What will be the price of the 8-year bond if its yield increases to 6.60%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. What will be the price of the 30-year bond if its yield increases to 6.60%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

d. What will be the price of the 4-year bond if its yield decreases to 4.60%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

e. What will be the price of the 8-year bond if its yield decreases to 4.60%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

f. What will be the price of the 30-year bond if its yield decreases to 4.60%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

g. Comparing your answers to parts (a), (b), and (c), are long-term bonds more or less affected than short-term bonds by a rise in interest rates?

h. Comparing your answers to parts (d), (e), and (f), are long-term bonds more or less affected than short-term bonds by a decline in interest rates?

Favorita Candys stock is expected to earn $4.20 per share this year. Its P/E ratio is 20. What is the stock price? (Round your answer to 2 decimal places.)

BMM Industries pays a dividend of $2.90 per quarter. The dividend yield on its stock is reported at 5.70%. What is the stock price? (Round your answer to 2 decimal places.)

Rework Table 7.4 for horizon years 1, 2, 3, and 10, assuming that investors expect the dividend and the stock price to increase at only 6% a year and that each investor requires the same 12% expected return. The company will pay a dividend of $1.50 at the end of the first year. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Here are data on two stocks, both of which have discount rates of 14%:

	Stock A			Stock B
Return on equity		14	%		10	%
Earnings per share	$	1.50		$	1.40
Dividends per share	$	1.20		$	1.20

a. What are the dividend payout ratios for each firm? (Enter your answers as a percent rounded to 2 decimal places.)

b. What are the expected dividend growth rates for each stock? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

c. What is the proper stock price for each firm? (Do not round intermediate calculations. Round your answers to 2 decimal places.)