Toyota Motor Credit Corporation, a subsidiary of Toyota Motor, offered securities for sale on March 28, 2008. Under the terms of the offering, Toyota Motor Credit promised to repay the owner of one these securities its face value, $100,000, on March 28, 2038. The bonds were priced at $24,099 and are to pay nothing until the March 2038 maturity when they are to be redeemed for $100,000. Thus, Toyota Motor Credit borrowed $24,099 for each bond and promised to pay back $100,000 thirty years later.

Why do you think Toyota Motor Credit Corporation would be willing to accept such a small amount in 2008 ($24,099) in exchange for a promise to repay an amount almost four times larger ($100,000) in the future?

Would you be willing to pay $24,099 today in exchange for $100,000 thirty years from now? Justify your answers

Answer rating: 100% (QA)

Toyota Motor Credit Corporation would be willing to accept such a smal... View the full answer