(A) Adequate information: Tuition fee obligation-$10000 Interest rate- 8% To calculate: The present value of obligation and duration of obligation Introduction: The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Question

4. On August 20, Mr. and Mrs. Cleaver decided to buy a property from Mr. and Mrs. Ward for $105,000. On August 30, Mr. and Mrs. Cleaver obtained a loan commitment from OKAY National Bank for an $84,000 conventional loan at 5 percent for 30 years. The lender informs Mr. and Mrs. Cleaver that a $2,100 loan origination fee will be required to obtain the loan. The loan closing is to take place September 22. In addition, escrow accounts will be required for all prorated property taxes and hazard insurance; however, no mortgage insurance is necessary. The buyer will also pay a full year's premium for hazard insurance to Rock of Gibraltar Insurance Company. A breakdown of expected settlement costs, provided by OKAY National Bank when Mr. and Mrs. Cleaver inspect the uniform settlement statement as required under RESPA on September 21, is as follows: I. Transactions between buyer-borrower and third parties: a. Recording fees--mortgage b. Real estate transfer tax c. Recording fees/document…

Answer 1

Question

Chapter 11, Problem 15PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

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4. On August 20, Mr. and Mrs. Cleaver decided to buy a property from Mr. and Mrs. Ward for $105,000. On August 30, Mr. and Mrs. Cleaver obtained a loan commitment from OKAY National Bank for an $84,000 conventional loan at 5 percent for 30 years. The lender informs Mr. and Mrs. Cleaver that a $2,100 loan origination fee will be required to obtain the loan. The loan closing is to take place September 22. In addition, escrow accounts will be required for all prorated property taxes and hazard insurance; however, no mortgage insurance is necessary. The buyer will also pay a full year's premium for hazard insurance to Rock of Gibraltar Insurance Company. A breakdown of expected settlement costs, provided by OKAY National Bank when Mr. and Mrs. Cleaver inspect the uniform settlement statement as required under RESPA on September 21, is as follows: I. Transactions between buyer-borrower and third parties: a. Recording fees--mortgage b. Real estate transfer tax c. Recording fees/document…

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Answer 2

Question

Chapter 11, Problem 15PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Expert Solution & Answer

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Answer 3

Question

Chapter 11, Problem 15PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Expert Solution & Answer

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Answer 4

Question

Chapter 11, Problem 15PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Expert Solution & Answer

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Answer 5

Chapter 11, Problem 15PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Answer 6

Chapter 11, Problem 15PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Answer 7

Chapter 11, Problem 15PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Answer 8

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Answer 9

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Answer 10

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Answer 11

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Answer 12

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Answer 13

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Answer 14

Expert Solution & Answer

Answer 15

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Answer 25

Ch. 11.2 - Prob. 1EQ Ch. 11.2 - Prob. 2EQ Ch. 11.2 - Prob. 3EQ Ch. 11.3 - Prob. 1EQ Ch. 11.3 - Prob. 2EQ Ch. 11.3 - Prob. 3EQ Ch. 11 - Prob. 1PS Ch. 11 - Prob. 2PS Ch. 11 - Prob. 3PS Ch. 11 - Prob. 4PS

(A) Adequate information: Tuition fee obligation-$10000 Interest rate- 8% To calculate: The present value of obligation and duration of obligation Introduction: The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

(A) Adequate information: Tuition fee obligation-$10000 Interest rate- 8% To calculate: The present value of obligation and duration of obligation Introduction: The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

(B) To calculate: The time period at which zero coupon bond will immunize the tuition fee obligation. Introduction: The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

(B) To calculate: The net position of Zero Coupon Bond when interest factor increases to 9% Introduction: The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

(D) To calculate: the net position if the rate decreases to 7% Introduction: The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Chapter 11 Solutions

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond