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1) (Annuity payments) Ford Motor Company’s current incentives include 5.7 percent APR financing for 72 months or $1,100 cash back on a Mustang. Let’s assume Suzie Student wants to buy the premium Mustang convertible, which costs $34,000, and she has no down payment other than the cash back from Ford. If she chooses the $1,100 cash back, Suzie can borrow from the VTech Credit Union at 7.7 percent APR for 72 months.

  1. If Suzie chooses 5.7 percent APR financing for 72 months to buy the premium Mustang convertible, which costs $34,000 PMT(62.632529), what will her monthly payment be? (Round to the nearest cent.)
  2. If Suzie chooses $1,100 cash back to buy the premium Mustang convertible and borrows $32,900 from the VTech Credit Union at 7.7 percent APR for 72 months, how much will her monthly payment be?
  3. Which option should Suzie Student choose?

2) (Common stock valuation) The common stock of NCP paid $1.21 in dividends last year. Dividends are expected to grow at an annual rate of 6.40 percent for an indefinite number of years.

  1. If your required rate of return is 9.30 percent, what is the value of the stock for you?
  2. Should you make the investment?

3) (Calculating rates of return) The common stock of Placo Enterprises had a market price of $8.34 on the day you purchased it just one year ago. During the past year, the stock had paid a dividend of $0.54 and closed at a price of $11.47. What rate of return did you earn on your investment in Placo’s stock? (Round to two decimal places.)

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