Answer 1 (a)
The bank will discount the installment contract for $655,635.16, based on the discounted present value of $15700 @ 7% installments receiving per month for the next 4 years.
Answer 1 (b)
The revenue in five years will grow up to $2,468,373,032.89 at an annual growth rate of 12.60 for the next five years.
Answer 1 (c)
The lowest effective annual rate amongst the borrowing options is Option C, will prove to be the most beneficial choice to borrow funds.
- Option A Effective Annual Rate – 6.63%
- Option B Effective Annual Rate – 6.66%
- Option C Effective Annual Rate – 6.62%
Answer 1 (d)
The Banks offer of a loan at 3.8% Annual Rate which is to be compounding quarterly the Effective annual rate will be 3.85%, the monthly payment will be $8,336 and quarterly payments are $25,008.04.
Answer 1 (e)
The yield to maturity for the bond is 6.06%.
Answer 1 (f)
The coupon amount for each payment is $35.
Answer 2 (a)
Capital Assets Pricing Model (CAPM) is the affiliation between the expected return and the risk of investing in any security, the expected rate of return for COH would be 4.9% whereas the Hypothetical Company called “AB” expected rate of return would be 0.70%.
Answer 2 (b)
The portfolio diversifies the risks, assuming an equal weight for COH and AB the return will be 2.8% and the beta would be 0.15.
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