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1. You have a c You have a common stock that is known to pay a cash dividend whose growth rate is g. The next
1. You have a c You have a common stock that is known to pay a cash dividend whose growth rate is g. The next dividend will be put and the market interest rate is i. The present values of the dividends will be prt prt(1+g) pint(1 +9) pint(1+g) . Iti + Derive the formula PV = (1+i) (1+i) (1+i)' 2. You are looking to buy a sports car costing $30,000. Dealer ABC is offering a special reduced financing rate of 2.4% APR on new car purchases for three year loans, with monthly payments. Dealer XYZ is offering a cash rebate. Any customer taking the cash rebate would of course be ineligible for the special loan rate and would have to borrow the balance of the purchase price from the local bank at the 6% APR with monthly payments for 36 months. How large must the cash rebate be on this $30,000 car to entice a customer away from the dealer who is offering the special 2.4% financing? 3. Suppose you are considering borrowing $200,000 to finance your house. The annual percentage rate is 4.8% and payments are made monthly. 3.1. If the mortgage has a 30-year amortization schedule, what are the monthly payments? 3.2. What effective annual rate would you be paying
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