A bank offers a home buyer a 25-year loan at 9% per year. If the much must be repaid every year? OA. $17,103.46 OB. $22,804.61 OC. $19,954.03 OD. $14,252.88 www
A bank offers a home buyer a 25-year loan at 9% per year. If the much must be repaid every year? OA. $17,103.46 OB. $22,804.61 OC. $19,954.03 OD. $14,252.88 www
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:**Problem Statement:**
A bank offers a home buyer a 25-year loan at 9% per year. If the home buyer borrows $140,000 from the bank, how much must be repaid every year?
**Choices:**
- **A.** $17,103.46
- **B.** $22,804.61
- **C.** $19,954.03
- **D.** $14,252.88
---
This problem involves calculating the annual payment required for a fixed-rate, long-term loan. To solve this, you can use the formula for the annuity payment (PMT) based on the loan amount (principal), interest rate, and loan term.
Transcribed Image Text:**Problem Description:**
A company issues a ten-year bond at par with a coupon rate of 6.7%, paid semi-annually. The Yield to Maturity (YTM) at the beginning of the third year of the bond (8 years left to maturity) is 9.3%. What is the new price of the bond?
**Options:**
- A. $1,027
- B. $856
- C. $1,198
- D. $1,000
**Solution Explanation:**
To find the new price of the bond, calculate the present value of the bond's future cash flows, which consist of the semi-annual coupon payments and the face value at maturity. Use the given YTM for discounting.
Expert Solution
Step 1: Define=annual payments
Loans are paid by equal and fixed annual payments and these payments carry the payment for loan and payment for interest.
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