Please answer all parts i will upvote right away within $30$mins please at least answer the $3$ questionsQ$1.(10$ marks$)$

You recently completed your MBA at the University of British Columbia. Upon graduation you purchased

a brand$-$new Tesla Model Y for $$75,000.$ Vancity credit union quotes you $9\%$ for a $72-$month loan with

$10\%$ down payment. RBC quotes you $8\%$ for a $60$ month loan, with $5\%$ down. You plan on trading in the

car for a new one in two years.

For both loan offers, what will your monthly payment be$?$ What is the effective interest rate on the

loan? What will the loan balance be when you do the trade in$?$

Prepare a loan amortization schedule for both loans. Which loan is your preference and why?

Q$2.(10$ marks$)$

Sammy Singh the owner of Singh Developments is evaluating a new project in Kelowna. Judy McJudes,

the company$$s CFO has just estimated the future costs and cash flows of the project.

Singh Developments has a Beta of $1\mathrm{.}8,$ the risk$-$free rate is $3\%$ and the total return on the market is $8\mathrm{.}5\%.$

Here are the cash flows:

Year

Cash

Flows

$0$

$($$$550,000$

$)$

$197,000$

$2120000$

$385000$

$422000$

$5150000$

$6230000$

$719000$

$875000$

$9-50000$

Construct a spreadsheet showing the payback, internal rate of return, and NPV for the proposed project.

Should Singh proceed with the project?

Q$3.(10$ marks$)$

Donny Wanny recently received a business degree and decided to enter the mortgage broker business.

He is opening his own brokerage. His next$-$door neighbor Lonnie approached Donny about a mortgage

she needs for a house she is building. The house will be completed in six months. Lonny wants a $30-$year,

fixed rate mortgage of $$1$ million with biweekly payments.

Donny agreed to lend the money in six months at $8\%.$ Donny doesn$$t have the money so he approaches

a private lender he knows named Ronnie, about purchasing the loan in six months. Ronnie agrees, but

won$$t set the price until six months from now.

There are government of Canada bond futures available for delivery in six months. A Government of

Canada bond contract is for $$100,000$ in face value of ten$-$ year Government of Canada contracts.

a$.$ What is the monthly payment on the mortgage?

b$.$ What is the most significant risk in this deal for Donny?

c$.$ How can Donny hedge this transaction?

d$.$ Suppose that rates change to $7\%$ in the next six months.

a$.$ How much would Ronny be willing to pay for the mortgage?

b$.$ What will happen to the Government of Canada Bond futures contracts? Will the short

or long position increase in value?

e$.$ Suppose in the next six months interest rates change to $9\%.$

a$.$ How much would Ronny be willing to pay for the mortgage?

b$.$ What will happen to the Government of Canada Bond futures contracts? Will the short

or long position increase in value?

f$.$ Are there any possible risks Donny faces in using Government of Canada bond futures contracts

to hedge the interest rate risk?

Q$4.$ Bonus Question $(15$ marks$)$

Consider the following table which gives a security analyst$$s expected return on two stocks and the

market index in two scenarios:

ScenarioProbabilityMarket ReturnAggressive StockDefensive Stock

$10\mathrm{.}56\%4\%6\%$

$20\mathrm{.}522\%32\%14\%$

a$.$ What are the Betas of the two stocks?

b$.$ What is the expected return on each stock?

c$.$ If the T$-$bill is $8\%$ draw the SML for the economy.

d$.$ Plot the two securities on the SML graph. What are the alphas of each?

e$.$ What hurdle rate should be used by the management of the aggressive firm for a project with

the risk characteristics of the defensive firm$$s stock?