Victor visited Honda showroom one year ago to check 2020 CRV car price, and it was...

Transcribed Image Text:

Victor visited Honda showroom one year ago to check 2020 CRV car price, and it was $45,000 everything included. The interest rate on offer that time was 2.99% APR monthly compounding. Victor had $5,000 down payment for the purchase, but he didn't buy the CRV. Victor had a shock of his life when he just visited the same showroom today. The car's price is still the same, but the interest rate decrease to 2.50% APR monthly. Victor still have $5,000 to be used as down payment for the car purchase. Calculate the monthly payment if he buys today with 7 years financing, assuming there is no negotiation. Would Victor have made more monthly payment if he bought the car last year? Explain. Question 6: Gulab and Gulab (G&G) issues a bond that pays 10% semi-annual coupon, have a $1,000 face value, and mature in 4 years. Bonds of equivalent risk yield (yield to maturity) 7%. What is the market price of G&G's bond? Due to the current uncertain economic situation, investors are selling stocks and buying more bonds. What could happen to the price and yield of G&G? Explain. Question 7: Innova Tech (IT) company is getting well known among analysts due to its planned dividend payment. The company plans to pay $0.80 a share next year and $1.60 a share the following year. After that, it plans to pay constant $2 per share indefinitely. What is the price of IT's stock today if the market rate of return on similar stock is 12%? What would be the impact on the price of IT stock if the market is uncertain of whether the company will be providing mentioned dividends in the future, due to unfavorable economic situation? Explain. Victor visited Honda showroom one year ago to check 2020 CRV car price, and it was $45,000 everything included. The interest rate on offer that time was 2.99% APR monthly compounding. Victor had $5,000 down payment for the purchase, but he didn't buy the CRV. Victor had a shock of his life when he just visited the same showroom today. The car's price is still the same, but the interest rate decrease to 2.50% APR monthly. Victor still have $5,000 to be used as down payment for the car purchase. Calculate the monthly payment if he buys today with 7 years financing, assuming there is no negotiation. Would Victor have made more monthly payment if he bought the car last year? Explain. Question 6: Gulab and Gulab (G&G) issues a bond that pays 10% semi-annual coupon, have a $1,000 face value, and mature in 4 years. Bonds of equivalent risk yield (yield to maturity) 7%. What is the market price of G&G's bond? Due to the current uncertain economic situation, investors are selling stocks and buying more bonds. What could happen to the price and yield of G&G? Explain. Question 7: Innova Tech (IT) company is getting well known among analysts due to its planned dividend payment. The company plans to pay $0.80 a share next year and $1.60 a share the following year. After that, it plans to pay constant $2 per share indefinitely. What is the price of IT's stock today if the market rate of return on similar stock is 12%? What would be the impact on the price of IT stock if the market is uncertain of whether the company will be providing mentioned dividends in the future, due to unfavorable economic situation? Explain.

Answer rating: 100% (QA)

Solutions Answer 5 Using the loan calculator formula we can calculate the monthly payment P L D r12 1 r12N12 1 r12N12 1 where P monthly payment L tota... View the full answer