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Q8. Allan buys a car on hire purchase paying six annual instalments of 3,200, the first being an immediate cash deposit. Assuming an interest rate
Q8. Allan buys a car on hire purchase paying six annual instalments of 3,200, the first being an immediate cash deposit. Assuming an interest rate of 8 per cent is being charged by the hire-purchase company, how much is the current cash price of the car? Q9. Imagine that the market yield to maturity for five-year bonds in a particular risk class is 6 per cent. You buy a bond in that risk class which offers an annual coupon of 5 per cent for the five years, with the first payment in one year. The bond will be redeemed at par (100) in five years. (a) How much would you pay for the bond? (b) How much would you pay for the bond if you think that the company became less risky, and its yield to maturity should be 4 percent
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