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IgorLugansk [536]
3 years ago
9

Suppose, you sold an apartment house by accepting $1,000,000 down and monthly payments of $15,000 per month for 10 years. You pl

ace the entire down payment and all payments as they are received into a money market account earning 5 percent compounded monthly. What is the amount you will have accumulated in the money market account when the mortgage is paid of
Business
1 answer:
Nadya [2.5K]3 years ago
3 0

Answer:

The present value is $3,991,855.88

Explanation:

The interest given can be converted into effective annual rate using the below formula:

EAR = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100

EAR=(1+5%/12)^12-1*100

       =5.12%

FV of downpayment=PV*(1+r)^N

                                  =$1000000*(1+5.12%)^10

                                   =$ 1,647,606.60  

Future of an ordinary annuity=A((1+r)^N-1/r

                                                =$15000*((1+5.12%/120)^10*12-1))/5.12%/120

                                                =$2,344,249.28

Total present values=2344249.28+1,647,606.60  

                                  =$3,991,855.88

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Consider two perfectly negatively correlated risky securities, X and Y. Security X has an expected rate of return of 9% and a st
Aneli [31]

Answer:

0.41

Explanation:

The computation of the weight of security Y in the minimum variance portfolio is shown below:-

Weight of security X = Standard deviation of security Y ÷ (Sum of the standard deviation of securities)

= 39% ÷ (39% + 27%)

= 39% ÷ 66%

= 59.01%

Weight of security Y = 1 - Weight of security X

= 1 - 59.01%

= 0.41

5 0
2 years ago
Suppose Ford Motor Company issues a five year bond with a face value of $5,000 that pays an annual coupon payment of $150.
blondinia [14]

Answer:

interest rate =  15%

value of the bond will decrease

Explanation:

given data

face value = $5,000

time = 5 year

annual coupon payment = $150

solution

we get here interest rate on the borrowed funds that will be as

interest rate = \frac{annual\ coupon}{face\ value/time}  × 100

put here value we get

interest rate =  \frac{150}{\frac{5000}{5} }  × 100

interest rate =  15%

and

when bond issued at interest rate =  3 %

but market interest rate 4%

so seller will reduce price of bond less than the face value

because we will look for atleast 4% payout when bond matures

so value of the bond will decrease

6 0
3 years ago
Marsha Mellow’s weekly gross earnings for the week ended May 23 were $1,250, and her federal income tax withholding was $201.65.
Nataliya [291]

Answer:

$954.60

Explanation:

Gross Pay: Gross income for an individual, also known as gross pay, is the individual's total pay from his employer before taxes or other deductions.

Net Pay: Gross income for an individual, also known as gross pay, is the individual's total pay from his employer after taxes or other deductions.

Particulars       Amount   Amount

Gross Pay                          $1,250

Withholding deduction:

Income tax       <em>($201.65)</em>

Social Security  <em>(1,250*0.06 = $75)</em>

Medicare tax <em>(1,250*0.015 = $18.75)</em>

Net pay                                           $954.60  

8 0
3 years ago
Consider the following scenario:
Nimfa-mama [501]

Answer:

The price would definitely increase

Explanation:

Inferior good are good that of low quality which are consumed by low income earners and with an increase in the income of the consumer of an inferior good, the demand for the good reduces.

Note: the demand for inferior good reduces because of increase in consumers income, so this has nothing to do with the price.

On an economic sense, increase in cost of production, will definitely lead to an increase in the price of the goods produced.

8 0
3 years ago
An interest rate swap has 3 years of remaining life. Payments are exchanged annually. Interest at 3% is paid and 12-month LIBOR
noname [10]

Answer:

2.66% of the principal.

Explanation:

Suppose the principal 100.

The value of the floating rate bond underlying the swap is 100.

The value of the fixed rate bond is 3/1.02 + 3/(1.03)^2 + 103/(1.04)^3 = 97.34.

The value of the swap is therefore 100−97.34 = 2.66 or 2.66% of the principal.

6 0
2 years ago
Read 2 more answers
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