Question

18. A floating rate bond is 2 a bond for which the coupon rate is indeterminable b. a bond for which the coupon rate is unknowable a bond for which the coupon rate is fixed at all times d. bond for which the coupon rate is resets periodically based on a formula c 19. LIBOR stands for London Inter-bank Order Rate b. Lisbon Inter-bank Offer Rate London Inter-bank Offer Rate d. London Interest-based Offer Rate / CUSIP stands for Committee on Uniform Security Identification Prices b. Committee on Uniform Security Identification Procedures Congress for the Uniform Security Identification Problems d. Congress for the Uniform Security Issues Privatized Amortizing Securities are securities for which scheduled payments of principal and interest are made b. Have readily identifiable maturities Could have a weighted average life d. Both 'a' and 'e' are true You borrowed $500.000 loan for 30 years at 6% interest per year. Use this information to answer the next three questions. 22. What is your monthly payment? $3,299.76 $3,015.77 c. $2,997.78 $2,500.00 23. How much principal (SPt) will you pay in the 60 month? a $668 b. $270 c. $533 d. None of the above

Answer 1

PT 18 A floating rate bond is a bond for which the coupon rate is unknowable i.e.option b

PT 19 LIBOR Stands for london interbank offer rate i.e.option c

PT 20 CUSIP stands for committee on uniform security identification procedure i.e. option b

PT 21 Amortizing securities are securities for which scheduled payment of principal and interest are made i.e.optionC

PT 22

EMI = [(P*R)*(1+R)n] /[(1+R)n-1]

where P is amount borrowed, R is rate of interest, n is tenure of payment

EMI = [(500000*.06)*(1+.005)360] /[(1+.005)360-1] i.e.$2997.75 option C

PT 23

Years	Balance	Interst	emi	principal
0	500000.00
1	499502.25	2500.00	2997.75	497.75
2	499002.01	2497.51	2997.75	500.24
3	498499.27	2495.01	2997.75	502.74
4	497994.02	2492.50	2997.75	505.25
5	497486.24	2489.97	2997.75	507.78
6	496975.92	2487.43	2997.75	510.32
7	496463.05	2484.88	2997.75	512.87
8	495947.61	2482.32	2997.75	515.43
9	495429.60	2479.74	2997.75	518.01
10	494909.00	2477.15	2997.75	520.60
11	494385.79	2474.54	2997.75	523.21
12	493859.97	2471.93	2997.75	525.82
13	493331.52	2469.30	2997.75	528.45
14	492800.43	2466.66	2997.75	531.09
15	492266.68	2464.00	2997.75	533.75
16	491730.27	2461.33	2997.75	536.42
17	491191.17	2458.65	2997.75	539.10
18	490649.37	2455.96	2997.75	541.79
19	490104.87	2453.25	2997.75	544.50
20	489557.65	2450.52	2997.75	547.23
21	489007.68	2447.79	2997.75	549.96
22	488454.97	2445.04	2997.75	552.71
23	487899.50	2442.27	2997.75	555.48
24	487341.24	2439.50	2997.75	558.25
25	486780.20	2436.71	2997.75	561.04
26	486216.35	2433.90	2997.75	563.85
27	485649.68	2431.08	2997.75	566.67
28	485080.18	2428.25	2997.75	569.50
29	484507.83	2425.40	2997.75	572.35
30	483932.62	2422.54	2997.75	575.21
31	483354.53	2419.66	2997.75	578.09
32	482773.56	2416.77	2997.75	580.98
33	482189.68	2413.87	2997.75	583.88
34	481602.87	2410.95	2997.75	586.80
35	481013.14	2408.01	2997.75	589.74
36	480420.45	2405.07	2997.75	592.68
37	479824.81	2402.10	2997.75	595.65
38	479226.18	2399.12	2997.75	598.63
39	478624.56	2396.13	2997.75	601.62
40	478019.93	2393.12	2997.75	604.63
41	477412.28	2390.10	2997.75	607.65
42	476801.59	2387.06	2997.75	610.69
43	476187.85	2384.01	2997.75	613.74
44	475571.04	2380.94	2997.75	616.81
45	474951.15	2377.86	2997.75	619.89
46	474328.15	2374.76	2997.75	622.99
47	473702.04	2371.64	2997.75	626.11
48	473072.80	2368.51	2997.75	629.24
49	472440.42	2365.36	2997.75	632.39
50	471804.87	2362.20	2997.75	635.55
51	471166.14	2359.02	2997.75	638.73
52	470524.23	2355.83	2997.75	641.92
53	469879.10	2352.62	2997.75	645.13
54	469230.74	2349.40	2997.75	648.35
55	468579.15	2346.15	2997.75	651.60
56	467924.29	2342.90	2997.75	654.85
57	467266.16	2339.62	2997.75	658.13
58	466604.74	2336.33	2997.75	661.42
59	465940.02	2333.02	2997.75	664.73
60	465271.97	2329.70	2997.75	668.05

$668 i.e. option a