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A home buyer in France can combine several mortgage loans to finance the purchase of a house. Given borrowing needs B and a horizon of T months for paying back the loans, the home buyer would like to minimize his total cost (or equivalently, the monthly payment p made during each of the next T months). Regulations impose limits on the amount that can be borrowed from certain sources. There are n different loan opportunities available. Loan i has a fixed interest rate ri, a length Ti ≤ T and a maximum amount borrowed bi. The monthly payment on loan i is not required to be the same every month, but a minimum payment mi is required each month. However the total monthly payment p over all loans is constant. Formulate a linear program that finds a combination of loans that minimizes the home buyer’s cost of borrowing. [Hint: In addition to variables xti for the payment on loan i in month t, it may be useful to introduce a variable for the amount of outstanding principal on loan i in month t.]
The mean annual return on the large stock portfolio is 11%. The mean annual return on T-bills if 2%. What is the risk premium for the large stock portfolio?
A company today issues a 15-year $1,000 bond that carries a 4.7% annual coupon rate (semi annual coupons). Find the total interest that the company expects to pay over the lifetime of the bond.
With exponential smoothing, lower alphas should be used for demand patterns which are more stable. In conducting time-series forecasts at a truck dealership, th
You can buy a 6-month put contract (i.e., for 100 shares) with an exercise price of $50 for a cost of $4.15 * 100. Assume the risk-free rate is 0%. What is your dollar profit (loss) and percentage return if you purchase one put contract, and in 6 mon..
Dividend signaling theory assumes that:
What will the market value of these bonds be if they are noncallable? What will be the value of the call provision to the company?
Midtown's president believes the television station will consider running the Midtown spot announcement on its highly rated evening news program (at the same cost) if Midtown will consider using additional television announcements.
Harvest Corporation is about to launch a new product. The initial value of Harvest Corporation's debt is $________ million.
Titan Inc. is considering introducing a new type of toy for cats. Titan expects the toys to become obsolete after five years when it will be discovered that toys only encourage cats to get anxious. What are the expected future cash flow regarding the..
Melanie receives an annuity paying $1,000 at the end of each month for eight years. This is directly deposited to a fund paying interest at an annual effective rate of 7.28%. Interest is paid out at the end of each year to a fund with an annual yield..
Shanken Corp. issued a 10-year, 6 percent semiannual bond 2 years ago. What is the company's total book value of debt?
When calculating the risk of a portfolio, you should adjust the process by the covariance, or interrelationship, of security price dispersion. When calculating the risk of a portfolio, you should add the weighted average of the standard deviation of ..
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