Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options: Pay $29,500 for the car today. Pay $2,900 at the end of each quarter for three years. 1-a. Assuming Denzel uses a discount rate of 8% (or 2% quarterly), calculate the present value. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.) 1-b. Which option gives him the lower cost? multiple choice Option 1 Option 2
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Exercise C-8 Calculate the present value of an annuity (LOC-3)
Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options:
- Pay $29,500 for the car today.
- Pay $2,900 at the end of each quarter for three years.
1-a. Assuming Denzel uses a discount rate of 8% (or 2% quarterly), calculate the present value. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.)
1-b. Which option gives him the lower cost?
multiple choice
-
Option 1
-
Option 2
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