1. You are buying a car for $30,000 and have three options—all of which will take 60 months to pay. The first option gives a $3000 discount on the car, but charges 5.9% financing. The second option pays for the car at the full price, but charges 1.9% financing. The third option is also discounted $3000 but at 5.5% financing and has a $5000 balloon payment. Which option will cost the least amount of money?
2. An investor uses this simple risk model. she measures risk-free risk and industry risk in r and she accepts the market view for this r. she estimates that CF2 at T=3 for this bond will be about $90. should she purchase the bond, why or why not.