finance homework

Finance 460 – Bonds, Loans, & Debt Instruments

1. What would be the annual payment of a $50,000 loan, payable in 8 years with an interest rate of 6.5%?

2. What should a bond sell for if the coupon rate is 5.2%, it matures in 6 years and it has ayield to maturity of 8%?

3. A 25 year bond is callable in 5 years. It has a 4.2% coupon rate payable semi-annually and a call premium of two years’ interest. It has yield to maturity of 6.5%. What is the yield to call?

4. A company borrows $150,000. It plans to fully amortize one-half of the loan with a balloon payment at the end of the term of the loan – in 10 years. When the loan matures, how much must the company expect to pay to the lender if the interest rate on the loan is 4.5%?

5. What is a bond’s yield to maturity if the bond cost $1010, has a 6.25% coupon rate payable semi-annually and matures in 16 years?

6. What is the yield to call for a 10 year bond that is callable in 2 years, has a 5.1% coupon rate and a yield to maturity of 6.5%? The bond’s call premium is one year’s interest.

7. What would be the final payment on a $750,000 loan? The company is amortizing one-third of the loan and has a balloon payment at the end of the loan – in 8 years and interest is 3.8% (rounded)?

8. What is the yield to maturity for a zero coupon bond that matures in 15 years and costs $375?

9. What is the yield to maturity on a 15 year bond that cost $922.50 and has a coupon rate of 4.8% payable semi-annually?

Answers (There are more than you need):

5.57% $36,826 $899.36 $87,853 $717.65 $8,211.86 $870.56 6.76%

13.36% $9,478 $3,375 6.15% $899.36 $9,000 $405,826 $33.847.62

$9,792.75 $26,520.50 $1,611.79 $32,235.88 $30,624.04 $536,825.92

6.15% 13.57% $84,478.41 13.57% $84,478.41 6.10%