1a. Which of the following situations would require a decrease in the coupon rate for a...

1a. Which of the following situations would require a decrease in the coupon rate for a bond selling at par?

A. The addition of a call provision

B. The addition of a convertibility option

C. The increase in the rating from BBB to AA

D. The addition of sinking fund provision

E. All of these choices are correct.

1b.A borrower took out a 30-year fixed-rate mortgage of $2,250,000 at a 7.2 percent annual rate. After ten years, she wishes to pay off the remaining balance. By then, interest rates have fallen to 7 percent. How much does she have to pay to retire the mortgage (to the nearest dollar)?

A. $2,122,426

B. $2,225,330

C. $2,015,678

D. $2,212,041

E. $1,939,765

Solutions

Expert Solution

1b. Option E is correct All of these choices are correct. because all the options will result in reduction of coupon rate

1c. Balance of Mortgage after 10 years = $1939765 Option E

jeff jeffy answered 1 year ago

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