Please use the formula approach or calculator approach (no excel approach), answer the following questions:

1. You currently don't have a car, but rent a car that's parked just outside your house whenever you need one. Your annual expenditure on rental cars is $2,500.

You've now considered purchasing a car that would give you the same level of convenience as your current lifestyle. The car costs $25,000 and can be sold for $5,000 after 10 years. You'd purchase the car with money from your savings account which always earns an interest rate of 6%.

Assume that all cash flows occur at the end of each year (maybe because you drive much more around Thanksgiving and Christmas).

(a) What is the present value of the benefits of owning that car, i.e., saving on rental expenses and selling the car?

(b) Should you buy the car?

2. One of General Electric's bond issues has an annual coupon rate of 3.6%, a face value of $1,000 and a required return of 5%.

(a) What is the value of the bond if the bond matures in 30 years?

(b) What is the value of the same bond 20 years later, when it has 10 years to maturity left, if interest rates haven't changed?

3. A corporate bond has 21 years to maturity, a face value of $1,000, a coupon rate of 5.2% and pays interest twice a year. The annual market interest rate for similar bonds is 3.1%. What is the value of the bond (in $)?

4. A bond has an annual coupon rate of 4.4%, a face value of $1,000, a price of $1,007.99, and matures in 10 years. What is the bond's YTM?

Remember to submit your answers in Word/Excel/Pdf with detailed calculation steps.