(1) Five years ago, Marcus bought a house. He secured a mortgage from his bank for $460,000. The mortgage had monthly payments for 20 years with an interest rate of 6.0% compounded monthly. However, after five years, it is time to renegotiate the mortgage. Interest rates have fallen to 4.5% compounded monthly, and Marcus still intends to make monthly payments and to pay back the debt over the remaining 15 years.

a)How much were Marcus' initial monthly payment (1 mark)

b) What is the outstanding principal on his mortgage (1 mark)

c)How much are Marcus' new monthly payments (1 mark)

(2) Jennifer has $9000 invested in a money market account that pays 1.5% interest compounded monthly at the end of each month. She maes deposits at the end of each month of $500. How much will she have in the account after 3 years?

(3)The KJ Corporation has averaged on ROE of 11% over the past 5 years and that should continue into the future. The firm has a payout ratio of earnings per share of $8.68 and paid the dividend yesterday. The discount rate for a firm of KJ's risk level is 12%

a) What is the expected Growth Rate of KJ's dividend (note: round to the nearest 100th of a percent) (1 mark)

b) What is KJ's current stock price? (to the nearest cent) (1 mark)

(4)The JG Investment Bank is about to issue a new series of 10 year bonds. The bonds will have a $100 face value and will be rated AA by a respected bond rating agency. Currently, the yield to maturity on AA rated bonds is 280 basis points above the yield on similar maturity government bonds. The bonds will make annual coupon payments

a) If the YTM on 10 year government bonds is 2.1%, what coupon rate should JG choose if it wants the bonds to sell at par (1 mark)

b) If JG issues 1,500 bonds, how much capital will they raise from the sale? (1 mark)

c) Two years later, the YTM on 8 year gov't bonds has risen to 2.5%. If the yield on AA rated bonds is still 280 basis points higher than a gov't bond, what is the new price of the bond? (round to the nearest cent) (1 Mark)

d) JG's bonds now now sell at

a Premium :

Par :

a Discount :

(5) It is September 1st, 2019 and Richard Spender has a problem... HE SPENDS TOO MUCH! Richard has managed to rack up some impressive debts over the past few years; however, he has another problem. He has four kids: a 14 year old son, a 13 year old daughter, and twins (a boy and a girl) aged 11 who will all be going to university. Each child will being university in September of the year they turn 18 (so far his 14 year old son, there are exactly 4 years to go, for his 13 year old daughter there are 5 years to go, and for his twins there are 7 years to go). Each child will require $5,000 per year for four years, for tuition payments payable each September. Richard would like to set up a savings plan to cover this expense. As his Financial Advisor, you can offer him an interest rate of 3% compounded monthly for a college savings plan. However, Richard must take care of his other debts as well:

Credit Card 1 $200

Credit Card 2 $200

Credit Card 3 $1,300

Credit Card 4 $50

Line of Credit $1,200

Car Loan $40,000

Mortgage $ 300,000

You have offered to consolidate all of Richard's debts into a single loan with a 10 year term and interest at 6% compunded monthly. Because he would like to pay as litttle as possible and will not accumulate any additional savings during the 10 years beyond what he is saving to meet his children's tuition expenses. Richard would like to make EQUAL payments at the end of each month that will save exactly enough to pay for his children's education and eliminate all his debts.

a) How much must richard save each month in the college savings plan? (4marks)

b) How much must he pay each month towards his debts? (2marks)

(6)Jeannie is saving up to make a down payment on a new car. She currently has 2070 in savings plan that pays interest at the end of every month with an interest rate of 3% compounded monthly; however she needs at least $5000 for the down payment. If Jeannie can save $118 at the end of every month, than the number of months it will take her to accumulate $5000 is...