Seven months ago, Rosetta purchased a bond for $3,000. Initially, she calculated the bond would be equivalent to a eight-month simple interest loan with an interest rate of 4.8% per year. However, Rosetta's car unexpectedly broke down today. To pay for the car repair, she decided to sell the bond to a friend for $3,080. (A) What is the maturity value of the bond? Round your answer to the nearest dollar. 3096 (B) From the friend's perspective, what is the equivalent simple interest rate per year? Round your answer to the nearest tenth of a percent. (C) By selling the bond for $3,080, Rosetta's true interest rate was not necessary the same as she initially calculated. What was her true equivalent simple interest rate per year?

Seven months ago, Rosetta purchased a bond for $3,000. Initially, she calculated the bond would be equivalent to a eight-month simple interest loan with an interest rate of 4.8% per year. However, Rosetta's car unexpectedly broke down today. To pay for the car repair, she decided to sell the bond to a friend for $3,080. (A) What is the maturity value of the bond? Round your answer to the nearest dollar. 3096 (B) From the friend's perspective, what is the equivalent simple interest rate per year? Round your answer to the nearest tenth of a percent. (C) By selling the bond for $3,080, Rosetta's true interest rate was not necessary the same as she initially calculated. What was her true equivalent simple interest rate per year?

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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If the owners choose to invest in bonds instead, they look at a $136,125 bond set to mature in 9 years with a bond rate of 2%, payable semi-annually. The market rate is 5.40%, compounded semi-annually. The owners will only purchase the bond if they can afford it with their savings $123,750, and they can get the bond at a discount because they think the market rate will go down, potentially making the bond more valuable in the future. 1. If the bond rate is 2%, will the bond be sold at a premium or a discount? Explain your answer.
Assume that your grandmother has sold her house on 31.12.2020. The house was partially paid for with a bond, issued on the day, which is secured by a mortgage on the house. The face value of the bond is ISK. 20,000,000. The bond is an annuity loan for 40 years and bears interest of 7.4% p.a. The due date is once a year and is December 31. Now your grandmother will soon have to file her taxes for the year 2023. She has therefore asked you to calculate what her interest income from the bond was in 2023. What was her interest income in 2023?
Michelle wants to borrow $4,500. Bank A will lend Michelle the money at a simple annual interest rate of 9% for 6 years. Bank B will lend her the money at 11% for 4 years. Which bank would charge Michelle the least amount of interest? Explain. Intro
Kayla is considering an investment in either a bond or a financial instrument that has a return of 0.5% per quarter. The face value for the bond is $25,000 that matures in 15 years and has a bond rate of 7% paid monthly. What is the amount of the monthly payments received from the bond?
5.
One year ago , Igor purchased a newly issued 15- year bond for $1,000. The bond's coupon rate of interest is 4.8 percent (paid annually). If the current value of the bond is $1,038 , what are (a) the current yield and capital gains yield Igor earned during the year and (b) the bond's yield to maturity today ? (LO 6-4 & LO 6-5 )
You have just sold your house for $1,050,000 in cash. Your mortgage was originally a 30-year mortgage with monthly payments and an initial balance of $720,000. The mortgage is currently exactly 18.5 years old, and you have just made a payment. If the interest rate on the mortgage is 7.75% (APR), how much cash will you have from the sale once you pay off the mortgage? (Note: Be careful not to round any intermediate steps less than six decimal places.) Cash that remains after payoff of mortgage is $ (Round to the nearest cent.)
You buy a 6% 1,000 bond for $1,000, immediately after semiannual interest has been paid to the previous owner. Eight years later, you sell the bond for $990.50, immediately after you receive the semiannual interest check. What is your yield during ownership?
Zoey Bettincourt gets a $400,000 loan for a townhouse. She secures a 5/1 ARM at an initial interest rate of 2.75%. Her initial monthly payment is $1,632.96. After 5 years, the interest rate on her loan changes to 3.5%. Calculate her new monthly payment (in dollars) in year 6 of the loan. (Round your answer to the nearest cent. Assume the length of the loan is 30 years.)
If the owners choose to invest in bonds instead, they look at a $136,125.00 bond set to mature in 9 years with a bond rate of 2.00%, payable semi-annually. The market rate is 5.40%, compounded semi-annually. The owners will only purchase the bond if they can afford it with their savings ($123,750.00), and they can get the bond at a discount because they think the market rate will go down, potentially making the bond more valuable in the future. 2. Calculate the purchase price of the bond if it is purchased today (9 years before maturity). 3. Do the owners have enough money to buy their bond? Will they make the purchase?
You have just sold your house for $950,000 in cash. Your mortgage was originally a 30-year mortgage with monthly payments and an initial balance of $740,000. The mortgage is currently exactly 18.5 years old, and you have just made a payment. If the interest rate on the mortgage is 6.75% (APR), how much cash will you have from the sale once you pay off the mortgage? (Note: Be careful not to round any intermediate steps less than six decimal places.) Cash that remains after payoff of mortgage is $ (Round to the nearest cent.)
Noor is buying a home with a $200,000 mortgage using a 5.5 percent, 30-year loan. How much of the first month's payment will go toward the principal if the payment per $1000 on this loan is $5.6779? O a. $917 O b. $219 O c. $0 O d. $538

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