Question 1
Word Problems. Please answer the questions below. Be sure to show all work.
Problem 1 (6 points)
Garry plans to purchase a house listed at $500,000 in Thunder Bay and he will make a down payment of $200,000 and the rest of the money is financed by a 25-year mortgage from TD Bank. The mortgage rate is a 3.63% APR compounded semiannually. What is the monthly payment?
Problem 2 (5 points)
Titanic Cruises Ltd issued a 15-year semi-annual coupon bond with a 10% coupon rate, $1,000 face value. And now the market interest rate is 5%. What is the bond price today?
Problem 3 (7 points)
You are considering purchasing a share of What if Inc.. What if just paid a dividend of $1. Management predicts that dividends will grow at 10% per year for the next 8 years and then at 1% thereafter. The required rate of return for What if is 12% EAR. How much would you pay right now for a share of What if Inc.?
Question 2
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