Due Friday, March 23, 2001

Let K be the number made from the last (rightmost) two digits of your student number. For example, if your student number is 202167603 then your K = 03 = 3 (three). Or if your student number is 201087581 then your K = 81 (eighty one). Use K as indicated in the questions below.Make sure your name and student number are on your submitted assignment. Show your work on each question. Your answer to each question should be in sentence form.

- A loan of $(42000+100K) at
*j*_{2}= 7.75% is amortized with monthly payments over 3 years. (The payments are equal except that the final payment is smaller.) (a) Use a spreadsheet to compute a complete amortization schedule. (b) Find the interest paid in the 12 payments of the second year (payments #13 through #24). - A loan is being amortized with equal monthly payments for 6 years.
If the repayment portion of the 11th payment is $(1145+0.1K) and the repayment
portion of the 20th payment is $1209.78 find the original loan.
- Land worth $190000 is purchased with a down payment of $20000
and monthly payments for 20 years at 8.5% compounded semiannually. Find
the buyer's equity in the land (100+K) months after the purchase.
- A loan is being repaid with quarterly payments of $(900+K) which
includes principal and interest at 7.5% compounded semiannually. What
is the original amount of the loan if the outstanding principal
is reduced to $20000 at the end of 4 years?
- A couple takes out a 20-year $(170000+100K) mortgage at
*j*_{2}= 8% with monthly payments. The mortgage is renewable after 5 years. However, after 2 years the couple wants to break the contract, pay off the mortgage (thereby incurring a penalty of 3 months payments), and refinance the balance (including the penalty) at*j*_{2}= 6% over the remaining 18 years. Compare their old and new monthly payment. - An association of 80 cottagers decides to set up a sinking fund to
accumulate $(200000+100K) for road improvements at the end of 4 years.
Each member of the association makes quarterly deposits and the fund earns
*j*_{2}= 4.5%. What is the quarterly deposit reqired for each cottager? - A woman wants to borrow $(10000+100K). Lender A offers amortization
with monthly payments over 10 years at
*j*_{2}= 7.5%. Lender B offers the sinking fund method, with monthly interest payments at*j*_{2}= 6.5% for 10 years and with the principal to be repaid at the end of 10 years. Her savings account (into which she would make monthly sinking fund payments) earns*j*_{2}= 3%. Find her monthly expense in each case and recommend which lender she should choose. - A $5000 bond has semiannual coupons at
*j*_{2}= 8% and matures at par in 10 years. Find the price to yield*j*_{2}= (6+0.01*K*)%. - A $10000 bond with bond rate
*j*_{2}= 5% matures at 102 in three years. If bought now to yield*j*_{2}= 7%, find the price and construct a bond schedule (either by hand or using a spreadsheet). - A $1000 callable bond with bond rate
*j*_{2}= 8.5% matures at par in 10 years. It is callable at 103 on any interest payment date starting 5 years from now. Find the price to yield*j*_{2}= (6+0.01*K*)%.

File translated from T

On 6 Mar 2001, 16:11.