Question: Study guide for Fin Exam. Please help with all problems so I can have a reference to see if I am properly completing them as

Study guide for Fin Exam. Please help with all problems so I can have a reference to see if I am properly completing them as a reference sheet. Hellp with 8,10, 1, and 2 at bottom of sheet.

What is the primary market? What is traded at the primary market? Whats the difference between the primary market and the secondary market?

2. Timeline: What are you calculating if you move a cash flow from left to right on the timeline? (P.V. or F.V.?) What do you use in your calculation? (Compounding interest? Single interest? Yield to Maturity? Or others?)

3. What is annuity cash flows? What are the characteristics of the annuity?

4. What is annuity due? How to calculate present value and future value of an annuity due?

5. What is perpetuity? What are the characteristics of perpetuity?

6. What are EAR and APR? Whats the difference between them?

7. What is bond? What are the different kinds of bonds? Is U.S. Treasurys return the risk-free return? Why?

8. Bonds Characteristics: (Drawing a timeline for a bond will help you on all following questions)

a. What is the face value of a bond? What are other names of face value?

b. What is coupon payment? How to calculate the coupon payment of a bond?

c. What is time to maturity? How to calculate the time to maturity of a bond?

d. What is yield to maturity (YTM)? How to calculate yield to maturity?

e. Typical cash flow of a bond (Single C.F.? Annuity? Or both?)

9. The relation between interest rate (YTM) and bond price. When the coupon rate equals YTM, whats the bond price? When coupon rate > or < YTM, whats the bond price?

10. What is amortization? How to calculate the amount of amortization?

Requirements for long questions:

a. Draw the timeline of the question. Put down all T.V.M factors: Size of cash flows, time, and interest rate.

b. Show the formula you should use to solve the problems, and the corresponding numbers in the formula.

c. Show all the financial calculators inputs and outputs.

1. You buy a house for $230,000. You put $40,000 down, and get a 15-year fixed APR 5.5 percent loan for the rest. How much is your monthly payment? What is the EAR for this 5.5 percent APR?

2. A 8.75 percent coupon bond with 30 years left to maturity is priced to offer a 5 percent yield to maturity. You believe that in one year, the yield to maturity will be 6.35 percent. If this occurs, what would be your profit by holding the bond for one year? The payments are made semi-annually

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