1)

Answer : To calculate EAR , we first need to calculate Monthly Rate of Interest :

Using Rate function of Excel :

=RATE(nper,pmt,pv,fv)

where

nper is the number of payments i.e 25 * 12 = 300 (Multiplied by 12 as Monthly payment)

pmt is the periodic payment i.e 10600

pv is the amount borrowed i.e 1,440,000

fv is the future value i.e 0

=RATE(300,10600,-1440000,0)

Monthly Rate is 0.6213% or 0.006213

EAR = [( 1 + Monthly rate)^12 - 1]

= [(1.006213)^12 - 1]

= 1.077158 -1

= 0.077158 or 7.72%

2)

Monthly Saving = $500

Let us assume that saving is made at the start of each month

Annual Interest Rate = 5%

Monthly Interest Rate = Annual Interest Rate/12 = 5%/12 = 0.4167%

Investment Period = 2 years = 24 months

The future value of savings after 2 years can be calculated using the FV formula in spreadsheet

FV(rate, number of periods, payment amount, present value, when-due)

Where, rate = monthly interest rate = 0.4167%

number of periods = 24

payment amount = Monthly saving = $500

present value = present value of investments = 0

when-due = when is the saving made each month = beginning = 1

The future value of savings after 2 years = FV(0.4167%, 24, 500, 0, 1) = $12,645.48

3)

A down-sloped yield curve indicates an expectation of lower rates in the future, which is yields on longer-term bonds, may continue to fall, corresponding to periods of economic recession. a downward sloping .

Bond A is due to mature in exactly t years from today, and Bond B is due to maturity in exactly T years from today (t<T).

Maturity of Bond B is greater than maturity of Bond A. Hence, the yield on B is smaller than the yield on A.