Five years ago, Stephen took out a 30-year mortgage with an APR of 12% for $200,000. If

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Question:

Five years ago, Stephen took out a 30-year mortgage with an APR of 12% for $200,000. If he were to refinance the mortgage today for 20 years at an APR of 6%, answer the following two questions:

a) What is his monthly mortgage payment on 30-year mortgage?

b) What is his monthly mortgage payment on refinancing for 20-year mortgage?

2.Consider the following questions with regard to the topic of bond:

a) A zero-coupon bond with a $1000 face value has 5 years to maturity. The bond currently trades at $500. What is the yield to maturity of this bond?

b) Consider a 2-year bond with a face value of $1000 and coupons paid semiannually. If the market interest rate implies a yield to maturity of 5%, what should be the coupon rate offered if the bond is to be traded at part?

3.MSFT will pay a constant dividend of $4 per share, per year, in perpetuity. If all investors pay a 25% tax on dividends, there is no capital gains tax, and the cost of capital for investing in MSFT stock is 10%.

What is the price for a share of MSFT stock?