Project #155339 - Finance

Business Tutors

Subject Business
Due By (Pacific Time) 11/27/2016 12:00 am

#5)  Ford Motor Company current incetives include 4.9% APR financing for 36 months or $1,400 cash back on a Mustang.Let's assume  Suzie student wants to buy the premium Mustang convertible , which costs $28,000, and she has no down payment other than cash back from Ford.  If she chooses the $1,400 cash back, Suzie can borrow from the Vtech credit union at 6.9%APR, for 36 months (Suzie"s credit credit isn't as good as prof. finance). What will Suzie student monthly payment be under each option? What option should she choose?(a) If Suzie chooses 4.9%APR financing  for 36 months to buy the premium mustung converitable, which costs $28,000=PMT(33.415757), What will her monthly payment be?-------round to nearest cent).  (b) If Suzie chooses $1,400 cash back  to buy the premium mustang convertible and borrows $26,600 from the VTech credit union at 6.9% APR for 36 months, how much will her monthlypayment be?-------round nearest cent) (C) Which option should Suzie student choose? a) choose cash back financing because the monthly payment under this option is lower. (b)  choose low interest rate financing because the monthly payment under this option is lower.  

#6) You are given three investment alternatives to analyze. The cash flows from these three investments are as follows: investment

end of year                A                    B                C    

 1                      $3,000             $ 1,000              $6,000  

  2                        4.000               1.000                6,000    

3                         5,000                 1,000               ( 6,000)

 4                         (6,000)              1,000                (6,000)  

5                           6,000                 4,000                16,000 What is the present value of each of these three  investments if the appropriate discount rate is 13 %? (a) what is the present value of investment A at an annual discount rate of 13 percent? round to nearest cent). (b) what is the precent value of investment B at an annual discount rate of 13 %?-------- round to nearest cent) (c) what is the precent value of investment C at an annual discount rate of 13 %?-------------round to nearest cent) #7)   calculating geometric & arithmetic avg rate of  return)  The common stock of the Brangus Cattle company had the following end of yr stock prices over the last five yrs and paid no cash dividends:  

 Time          Brangus cattle company

1                                 $16    

2                                     9      

3                                    14    

 4                                    24  

5                                      28  

  (a) the annual rate of return at the end of year 2 is --------(round to two decimal places). The annual rate of return at the end of year 3 is ----------- round to two decimal places). The annual rate of return at the end of year 4 is ----------- round to two decimal places) The annual rate of return at the end of year 5 is ------------round to two decimal places).  

(b)The arithmetic average rate of return earned in each year 2,3,4,5,by investing in Brabgus cattle company stock over  this period is ---------- round to two decimal places).

(c) the geometric  average rate of return earned in each year 2,3,4,and 5 by investing in Brangus Cattle Company stock over this period is --------------- round to two decimal places).

(d)which type of average rate of return best describes the average annual rate of return earned over the period ( geometric or arithmetic ) ? Why? select the best choice below)

A.) Geometric average return best describes the average annual rate of return over a period because it takes compounding into account, so it answers the question concerning the expected rate od return over a multi year period.

B)Arithmetic avg. return best describes the avg annual rate of return over a period because it is a simple avg. so it answers the question concerning the expected rate of return over a multi year period.

(C)Geometic  avg. return best describes the avg. annual rate of return over a period becauseit is a simple avg, so it answers the question concerning the expected rate of return over a multi yr period.

D) Arithmetic avg, return best describes the average annual rate of return over a period because it takes compounding into account, so it answers the question concerning the expected rate of return over multi year period.  

#8 computing standard deviation  for individual investment)  James Fromholtz is considering whether to invest in a newly formed investment fund. The fund's investment objective is to acquire home mortgage securties at what it hopes will be  bargain prices. The fund sponsor has suggested to James that the fund's  performance will hinge on how the national economy performs in the coming year. Specifically, he suggested the following possible  outcomes:  data table  

state of economy                probability            fund returns

rapid expansion &recovery     10%                       100%

 modest growth                      40%                          40% continued recession                  40%                        15%

 falls into depression                  10%                       -100%

 (A)what is your expected rate of return from this investment opportunity   -------------% round to two decimal places).

(B)calculate the standard deviation in the returns found in part A.---------round to two decimal places).

(C) would you be interested in making such an investment.

a) no, I would not be interested in making such an investment. The economy is most likely to sink into a depression.

b)yes, I would be interested in making such an investment. The economy is most likely to begin a rapid expansion  and recovery. c) your interest in making such an investment would depend on your risk toleerance. If you do not like risk you should avoid this investment, however if you do not mind risk you may want to make this investment.

 #9) security market line) Your father just learned from his financial advisor that his retirement portfolio has a beta of 1.76. He has turned to you to explain to himwhat this means. Specially, describe what you would  expect to happen to the value of his retirement fund if the following were to occur.

a) If the value of the market portfolio rises by 9%, then the value of your father's retirement fund should increase or decrease by -------%.

 b)If the value of the market portfolio drops by 9%, then the value of your retirement fund should increase or decrease by ------------%.

 c) Your father retirement portfolio is less or more risky than the market portfolio because your father's retirement portfolio beta,its systematic risk is greater or less than the markets portfolio beta.

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