COMM-3017EL Final: Final Exam Sample Questions

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Laurentian University of Sudbury
Commerce and Administration

A 15 year, 6 coupon bond pays interest annually. The bond has a face value of 1,000. What is the percentage change in the price of this bond if the yield to maturity rises from 6.25 to 6.5? Solution: decreased by 2.37 The monthly mortgage payment on your house is 586.81. It is a 30 year mortgage at a quoted rate of 7.8 (compounded semiannually). Approximately how much did you borrow for your mortgage? Solution: 82,496.10 or approx. 82,500 Using the same mortgage amount as in the previous question how much higher or lower would be your monthly payment under a 15year mortgage as compared to a 25year mortgage assuming the rate on both mortgages is 7.75 (compounded semiannually). Solution: higher by 154.24 Julia Limited sells a 12year semiannual coupon bond that has an effective annual return of 4.6529. What is the amount of each interest payment if the bond issue price is the same as the face value of the bond? Solution: 23. Joshua Inc. wants to sell bonds to finance its business expansion. To accomplish this, they plan to sell 20year, 6.2 million face value, zerocoupon bonds. The bonds will be priced based on a yield to maturity of 9.5. How many bonds must they sell to raise the required capital? Solution: 38,079 bonds How much interest is to be paid in the second year of a 6year loan of 100,000 with payments occurring at the end of each month, and a 6 annual interest rate compounded monthly? Solution 4,731
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