Horace and Myrtle want to buy a house. Their banker offered them $95,000 loan today at a

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Question:

Horace and Myrtle want to buy a house. Their banker offered them $95,000 loan today at a 12% annual rate for 20 years. What will their monthly payment be if they make equal monthly instalments (at the end of each month) over the next 20 years?

Question 2

Consider the following cash flows:

Date Cash Received Amount of Cash

1/1/2022 $100

1/1/2023 $180

1/1/2024 $500

1/1/2025 $250

Assuming today is 1/1/2022, what is the value of the cash flows on 1/1/2025? Use an 8% discount rate.

Question 3

Syntax Ltd is considering an investment in one other two shares below:

SHARE C	SHARE D
PROBABILITY	RETURN	PROBABILITY	RETURN
0.2	-2%	0.2	-5%
0.5	18%	0.3	6%
0.3	27%	0.3	14%
		0.2	22%

Calculate standard deviation and expected return. Explain which investment is better.

Question4

Caldwell, Inc. issued $1,000 face value zero-coupon bonds to the public. The bonds carry an 8% coupon rate and will mature in 8 years. The required rate of return on Caldwell bonds is 12%. What is the current market price (intrinsic value) of the bonds?

Question 5

You are evaluating the purchase of Cellars, Inc. ordinary shares that just paid a dividend of $1.80. You expect the dividend to grow at a rate of 12% for the next three years. You plan to hold the shares for three years and then sell it at a price of $36. You estimate that a required rate of return of 17.5% will be adequate compensation for this investment. Calculate the present value of the share.

Question 6

You are planning to purchase shares at AMDEX Ltd. You expect a return on the market of 8% and the risk-free rate to be 4%. The beta for AMDEX shares is 1.25 and the forecast return for AMDEX shares is 7.2%. Would you buy the share? Explain your answer with the relevant calculations

Question 7

You plan to buy a gaming system and can afford to set aside $2,150 towards the purchase today. If you can earn 8.0% per annum, compounded semi-annually, how much can you spend in four years on the purchase?