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#2. What is the difference between a discount yield and a bond equivalent yield? Which yield is used for Treasury bill quotes?
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#2. What are the differences among T-bills, T-notes, and T-bonds?
#3. What is a STRIPS? Who would invest in a STRIPS?
#6. What is the difference between general obligation bonds and revenue bonds?
#14. What is a callable bond? Is a call provision more or less attractive to a bond holder than a noncallable bond?
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#8. You can invest in taxable bonds that are paying a yield of 9.50 percent or a municipal bond paying a yield of 7.75 percent. If your marginal tax rate is 30 percent, which security bond
should you buy?
#17. A $1,000 face value corporate bond with a 6.75 percent coupon (paid semiannually) has 10
years left to maturity. It has had a credit rating of BB and a yield to maturity of 8.2 percent.
The firm recently became more financially stable and the rating agency is upgrading the bonds to BBB. The new appropriate discount rate will be 7.1 percent. What will be the change in the
bond’s price in dollars and percentage terms?
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#1. You plan to purchase a $100,000 house using a 30-year mortgage obtained from your local credit union. The mortgage rate
offered to you is 8.25 percent. You will make a down payment of 20 percent of the purchase price. (LG 7-4 L))
a. Calculate your monthly payments on this mortgage.
b. Calculate the amount of interest and, separately, principal paid in the 25th payment.
What will be your monthly payment on a $550,000 15 and a 30 yr mortgage if the rate is 3.45 % for people with good credit and 11.95% for people with bad credit 4 calculations? (The mortgage is $550,000 (not the price of the house) you will have to adjust bank rate.com default of 20% down to 0% down, 550k pmortgage) Also, how much interest will you pay over the life of the 4 loans you just calculated? Why would someone finance a house with a 10 year interest only loan (site 3 reasons)?
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#7. At the beginning of the year, you purchased a share of stock for $28.25. Over the year the dividends paid on the stock were $2.75
per share. (LG 8-5
a. Calculate the return if the price of the stock at the end of the year is $30.
b. Calculate the return if the price of the stock at the end of the year is $40.
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#1. What are foreign exchange markets and foreign exchange rates? Why is an understanding of foreign exchange markets
important to financial managers and individual investors?
#3. A U.S. insurance company invests $1,000,000 in a private placement of British bonds. Each bond pays €300 in interest per year
for 20 years. If the current exchange rate is €1.364/S, what is the nature of the insurance company’s exchange rate risk?
Specifically, what type of exchange rate movement concerns this insurance company?
#13. Explain the concept of interest rate parity. What does this concept imply about the long-run profit opportunities from investing
in international markets? What market conditions must prevail for the concept to be valid?
