Interest rate, mortgage loan and investment analysis Research and Discussion Project
Budget: $30 – $250 CAD
Question 1: Interest rate analysis
Question 2: Mortgage loan analysis
Question 3: Investment analysis
Question 4: Research and discussion
Question 1(a): Interest Rates
• Research and graph closed mortgage rates vs. GIC rates
• Plot results on a line graph with time to maturity on x axis and interest rate on y axis
• Label axes and include a title
• Include both lines on one graph for comparison
• Include a table, date, and source
• Comment on compounding frequency of rates quoted
Question 1(b): Interest Rate Analysis
Analyze the graphed results by discussing:
• Slope of lines
• Spread
• Risk
• Liquidity, administration costs
• Opportunity costs
Question 2: Mortgage Loan Analysis PART (a)
• Select a house or condominium for sale; describe and attach screenshot of property
• Calculate loan amount, and state the amortization, frequency of payment, term, and rate
• Calculate payment and OSB at end of the term
Question 2: Mortgage Loan Analysis PART (b) 5 marks and PART (c)
• Calculate principal and interest paid in first period and last period of term
• Calculate total interest paid and principal repaid during the first year of mtg and final year of term
• Calculate the total interest paid and total principal repaid over the term
• With the same loan amount, but different interest rate, term, and amortization, re-do all calculations from parts (a) and (b)
Question 2: Mortgage Loan Analysis PART (d)
• Compare and contrast the results from parts (b) and (c).
• Which mortgage is preferred? Briefly explain.
Question 2: Mortgage Loan Analysis PART (e)
• Pre-payment without penalty [use data from part (a)]
• Calculate revised OSB at the end of the term based on prepayment
• If loan was fully amortized, how does prepayment affect the number of payments required and the interest paid over the amortization?
• Comment on the results
Question 3: Investment Analysis
• Download the excel file attached
• File contains the details on the investment opportunity (cost, cash flows, investor’s yield, and reinvestment rate)
(a) Calculate NPV
(b) Calculate IRR
(c) Calculate NPV and IRR with the stated reinvestment rate
(d) Assuming the reinvestment rate is higher than IRR without explicit reinvestment, recalculate the NPV and IRR. Briefly comment on the results.
(e) Should the investor proceed? Why?
Question 4: Research and Discussion
•Discuss any two of the six listed topics
• Each answer should be approximately 300 words
• State source(s) in your answer (requires footnotes & works cited page)
I’ve also attached TWO examples of what this project should look like when it’s finished as well—please take a look. (Q4 are a little different in both)
PLEASE REMEMBER TO SHOW YOUR WORK! Especially with the equations. Thank you!
Question 2: Mortgage loan analysis
Question 3: Investment analysis
Question 4: Research and discussion
Question 1(a): Interest Rates
• Research and graph closed mortgage rates vs. GIC rates
• Plot results on a line graph with time to maturity on x axis and interest rate on y axis
• Label axes and include a title
• Include both lines on one graph for comparison
• Include a table, date, and source
• Comment on compounding frequency of rates quoted
Question 1(b): Interest Rate Analysis
Analyze the graphed results by discussing:
• Slope of lines
• Spread
• Risk
• Liquidity, administration costs
• Opportunity costs
Question 2: Mortgage Loan Analysis PART (a)
• Select a house or condominium for sale; describe and attach screenshot of property
• Calculate loan amount, and state the amortization, frequency of payment, term, and rate
• Calculate payment and OSB at end of the term
Question 2: Mortgage Loan Analysis PART (b) 5 marks and PART (c)
• Calculate principal and interest paid in first period and last period of term
• Calculate total interest paid and principal repaid during the first year of mtg and final year of term
• Calculate the total interest paid and total principal repaid over the term
• With the same loan amount, but different interest rate, term, and amortization, re-do all calculations from parts (a) and (b)
Question 2: Mortgage Loan Analysis PART (d)
• Compare and contrast the results from parts (b) and (c).
• Which mortgage is preferred? Briefly explain.
Question 2: Mortgage Loan Analysis PART (e)
• Pre-payment without penalty [use data from part (a)]
• Calculate revised OSB at the end of the term based on prepayment
• If loan was fully amortized, how does prepayment affect the number of payments required and the interest paid over the amortization?
• Comment on the results
Question 3: Investment Analysis
• Download the excel file attached
• File contains the details on the investment opportunity (cost, cash flows, investor’s yield, and reinvestment rate)
(a) Calculate NPV
(b) Calculate IRR
(c) Calculate NPV and IRR with the stated reinvestment rate
(d) Assuming the reinvestment rate is higher than IRR without explicit reinvestment, recalculate the NPV and IRR. Briefly comment on the results.
(e) Should the investor proceed? Why?
Question 4: Research and Discussion
•Discuss any two of the six listed topics
• Each answer should be approximately 300 words
• State source(s) in your answer (requires footnotes & works cited page)
I’ve also attached TWO examples of what this project should look like when it’s finished as well—please take a look. (Q4 are a little different in both)
PLEASE REMEMBER TO SHOW YOUR WORK! Especially with the equations. Thank you!