Question: Hello! How do i solve these? i)The company Knall is considering taking out a installment-free bond loan with a nominal value NOK 500,000, with 4
Hello! How do i solve these?
i)The company Knall is considering taking out a installment-free bond loan with a nominal value
NOK 500,000, with 4 years to maturity. Future rental payments (coupon interest) from
Bang to the bondholders makes up 2% of face value each year. consider
the market interest rate for similar loans is 4% per year.
What is the market price of the obligation?
ii) Per would like to buy a car that he thinks will cost 430,000 kroner in 3 years. He gets
pay each month and decide to start saving next month. He
saves on a high-interest account in Sparebanken Nordlys. The account provides an effective
annual interest rate of 2%.
How much does Per have to save a month to be able to buy the car in 3 years?
iii) Anna borrows NOK 3,000,000 from Sparebanken Nordlys today, the loan has a term of
5 years, the loan interest rate is 3% per year. What is the cash flow of the loan if this is a
annuity loan? (Interest and installments are paid once a year).
iv) A stock has a beta of 1.2 and an expected return of 14%. A risk-free
investment currently yields 2% return. Assume a securities market in KVM equilibrium.
What is the expected return on a balanced portfolio of the two
the investment options?
v) The twin brothers Ole and Per inherit NOK 100,000 each. Ole puts the money in the bank,
the bank pays risk-free rent of 1%. Assume that risk-free rent does not change them
next few years. Per invests his money in a fund that either provides a return
of 3% or a return of 11% in a year. There is an equal probability of
these to the returns.
What is the expected return and standard deviation on each of the twin brothers' one-year
investments?
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