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?
Use the following information for Questions 6-10: 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 one of these securities $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 gave up $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?
Found in MBA 640 Finance, Economics and Decision Making. Chapter 3 concept question #6
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