In this assignment, write a paper that shows your calculations for each scenario:
You can purchase a T-bill that is 90 days from maturity for $9,970. The T-bill has a face value of $10,000.
Calculate the T-bill's quoted yield.
Calculate the T-bill's bond equivalent yield.
Calculate the T-bill's EAR.
You plan to purchase a $130,000 house using a 15-year mortgage obtained from your local bank. The
mortgage rate is 5.25 percent. You will make a down payment of 20% of the purchase price.
Calculate your monthly payments on this mortgage.
Using an Excel Spreadsheet, construct the amortization schedule for the first 12 payments.
Compute a breakdown of the total payments of the mortgage into interest and principal payment.
As a portfolio manager for an insurance company, you are about to invest funds in one of three possible
investments:
10-year coupon bonds issued by the U.S. Treasury,
20-year zero-coupon bonds issued by the Treasury, or
One-year Treasury securities.
Based on the assumptions in Question 3, each possible investment is perceived to have no risk of default. You
plan to maintain this investment for a one-year period. The return of each investment over a one-year horizon
will be about the same if interest rates do not change over the next year. However, you anticipate that the U.S.
inflation rate will decline substantially over the next year, while most of the other portfolio managers in the
United States expect inflation to increase slightly.
If your expectations are correct, how is the return of each investment affected over the one-year horizon?
If your expectations are correct, which of the three investments should have the highest return over the oneyear horizon and why?
Offer possible reasons you might not select the investment that would have the highest expected return over
the one-year investment horizon.
Your response must adhere to the following standards:
Be 4-5 page (1200-1500 words) excluding the cover or reference pages.
Display work for all calculations.
Cite at least 6 references (at least 4 scholarly/peer reviewed)