# Hongyue Takes Out A 70 000 Loan For Twelve Years Payments Are At The End Of Each

1\. Hongyue takes out a \$70,000 loan for twelve years. Payments are at the end of each year. The annual effective interest rate is 2% for the first two years and 5% for the remainder of the loan term. Hongyue’s payments increase by 8% each year. Find the balance on the loan immediately following his fifth payment. (\$52,709.54)

2\. Big Corporation invests \$200,000 and receives a \$40,000 payment at the end of each year for 6 years. k% of each \$40,000 payment is deposited in a fund at 5% annual effective rate to achieve complete replacement of capital at the end of 6 years (in other words, the balance in the fund at the end of 6 years will be \$200,000).

(a) Find k. (73.50873)

(b) Find the yield rate for Big Corporation. (5.29826%)

3\. A \$1,200 9% ten-year bond has semiannual coupons. It is purchased at \$1030 and is redeemable at \$1,300. Find the coupon amount and the effective yield rate per coupon period. (5.95851%)