Toyota Motor Credit Corporation (TMCC), a subsidiary of Toyota Motor Corporation, offered some securities for sale to the public on March 28, 2008. Under the terms of the deal, TMCC promised to repay the owner of each security $100,000 on March 28, 2038, but investors would receive nothing until then. Investors paid TMCC $24,099 for each of these securities; so they paid $24,099 on March 28, 2008 for the promise of a $100,000 payment 30 years later.Why would TMCC be willing to accept such a small amount today ($24,099) in exchange for a promise to repay about four times that amount ($100,000) in the future?A feature of this particular deal is that TMCC has the right to buy back the securities on the anniversary date at a price established when the securities were issued. What impact does this feature have on the desirability of this security as an investment.Review “Mini Case: The MBA Decision” in your textbook on page 200, or at the end of Chapter 6 in your textbook. Then, answer the following questions: How does Ben’s age affect his decision to get an MBA?What other, perhaps non-quantifiable, factors affect Ben’s decision to get an MBA?Assuming all salaries are paid at the end of each year, what is the best option for Ben—from a strictly financial standpoint?Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?What initial salary would Ben need to receive to make him indifferent between attending Wilton University and staying in his current position?Suppose, instead of being able to pay cash for his MBA, Ben must borrow the money. The current borrowing rate is 5.4%. How would this affect his decision?
Explanation & Answer:
time vaue of monewy
securities for sale
The MBA Decision
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