Darnell receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 4% per year. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 20%. The following table shows two scenarios: a low-inflation scenario and a high-inflation scenario. Given the real interest rate of 4% per year, find the nominal interest rate on Darnell's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. Inflation Rate Real Interest Rate Nominal Interest Rate After-Tax Nominal Interest Rate After-Tax Real Interest Rate (Percent) (Percent) (Percent) (Percent) (Percent) 2.5 4.0         8.5 4.0           Compared with higher inflation rates, a lower inflation rate will    the after-tax real interest rate when the government taxes nominal interest income. This tends to    saving, thereby    the quantity of investment in the economy and    the economy's long-run growth rate.

your bank also requires that the monthly mortgage payments include properety tax and homeowners insurance payments. if the property tax is 1,710 per year and the properety insurance is 1458 per year for (PITI) what is the total monthly payment in $?

O'Reilly and CB Solutions. Heather O'Reilly, the treasurer of CB Solutions, believes interest rates are going to rise, so she wants to swap her future floating-rate interest payments for fixed rates. Presently, she is paying LIBOR + 2.00% per annum on $5,200,000 of debt for the next two years, with payments due semiannually. LIBOR is currently 3.99% per annum. Heather has just made an interest payment today, so the next payment is due six months from now. Heather finds that she can swap her current floating-rate payments for fixed payments of 7.001% per annum. (CB Solutions' weighted average cost of capital is 12%, which Heather calculates to be 6% per 6-month period, compounded semiannually). a. If LIBOR rises at the rate of 50 basis points per 6-month period, starting tomorrow, how much does Heather save or cost her company by making this swap? b. If LIBOR falls at the rate of 25 basis points per 6-month period, starting tomorrow, how much does Heather save or cost her company by…

Victory Markets, LLC ("VML") has a bank loan with a total principal of $3,800,000. The stated annual interest rate for the loan is 8.40%, and the loan is to be amortized with monthly payments over 6 years. VML wants the bank to change the provisions of the loan such that payments are made on an annual basis. What would be the economically equivalent annual interest rate (i.e., economically equivalent to 8.40% compounded monthly) for a loan with annual payments? 8.6632% 8.7311% 9.0023% 8.5987%

Use a bankers year: 360 T-bills (Treasury bills) are one of the instruments the U.S. Treasury Department uses to finance public debt. If you buy a 200-day T-bill with a maturity value of $17,750 for $17,564.46, what annual simple interest rate will you earn? Express your answer as a percentage.

Use the data provided for Gotbucks Bank Inc. to answer this question. Notes to the balance sheet: Currently, the fed funds rate is 8.5 percent. Variable-rate loans are priced at 4 percent over LIBOR (currently at 11 percent). Fixed-rate loans are selling at par and have five-year maturities with 12 percent interest paid annually. Core deposits are all fixed rate for two years at 8 percent paid annually. Euro CDs currently yield 9 percent. (LG 23-3) Gotbucks Bank Inc.(dollars in milllions) Assets   Liabilities Cash $30   Core Deposits $20 Federal Funds 20   Federal Funds 50 Loans (floating) 105   Euro Cds 130 Loans (Fixed) 65   Equity 20 Total Assets $220   Total Liabilities and Equity $220           a. What is the duration of Gotbucks Bank’s (GBI) fixed-rate loan portfolio if the loans are priced at par? b. If the average duration of GBI’s floating-rate loans (including fed fund assets) is 0.36 year, what is the duration of the bank’s assets? (Note that the duration…

Suppose that you're planning a vacation and borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with interest prepaid (a discount interest loan). Also, assume that the bank requires you to maintain a compensating balance equal to 10 percent of the initial loan value. What effective annual interest rate are you being charged?

The rate quoted by Big Bank on a car loan is 8 percent. The annual rate of inflation is currently 1.5 percent. What is the approximate real interest rate paid by the consumer on this loan?

Assume you borrow $10,000 today and promise to repay the loan in two payments, one in year 2 and the other in year 4, with the one in year 4 being only half as large as the one in year 2. At an interest rate of 10% per year, the size of the payment in year 4 is closest to: (a) $4280 (b) $3975 (c) $3850 (d) $3690

Suppose that $100,000 is borrowed at 8 percent and is to be repaid in three equal annual installments. Prepare a debt amortization table and show that the net present value of the after-tax cash flows of the debt is zero using the after-tax cost of debt as the discount rate. The tax rate is 40 percent.