1) (Annuity payments) Ford Motor Company’s current incentives include 5.7 percent APR financing for 72 months or $1,100 cash back on a Mustang. Let’s assume Suzie Student wants to buy the premium Mustang convertible, which costs $34,000, and she has no down payment other than the cash back from Ford. If she chooses the $1,100 cash back, Suzie can borrow from the VTech Credit Union at 7.7 percent APR for 72 months.
- If Suzie chooses 5.7 percent APR financing for 72 months to buy the premium Mustang convertible, which costs $34,000 = PMT(62.632529), what will her monthly payment be? (Round to the nearest cent.)
- If Suzie chooses $1,100 cash back to buy the premium Mustang convertible and borrows $32,900 from the VTech Credit Union at 7.7 percent APR for 72 months, how much will her monthly payment be?
- Which option should Suzie Student choose?
2) (Common stock valuation) The common stock of NCP paid $1.21 in dividends last year. Dividends are expected to grow at an annual rate of 6.40 percent for an indefinite number of years.
- If your required rate of return is 9.30 percent, what is the value of the stock for you?
- Should you make the investment?
3) (Calculating rates of return) The common stock of Placo Enterprises had a market price of $8.34 on the day you purchased it just one year ago. During the past year, the stock had paid a dividend of $0.54 and closed at a price of $11.47. What rate of return did you earn on your investment in Placo’s stock? (Round to two decimal places.)