Answer:
a. In order to determine the present value of lease we can use the same APR as the car loan (7%). We can use the present value of an annuity formula:
PV = monthly payment x annuity factor
- monthly payment = $509
- PV annuity factor, 0.58333%, 48 periods = 41.76344
PV of the annuity = $509 x 41.76344 = $21,257.59
total present value of lease contract = $21,257.59 + $109 = $21,366.59
b. the present value of purchasing the car is $40,000 - $28,000/1.07⁴ = $40,000 - $21,361.07 = $18,638.93
c. the break even resale price = (sales price - PV of lease) x (1 + 7%/12)⁴⁸ = ($40,000 - $21,366.59) x (1 + 0.07/12)⁴⁸ = $18,633.41 x 1.32205 = $24,634.37
Answer: b. selling VIX calls
Explanation:
The client could make some money selling VIX calls. Call options give the holder the right to buy an underlying asset at a set price in future and they will do so if the market price of the underlying asset increases past the call price of the asset (exercise price).
If the client expects that market conditions will be stable then an increase in stock price is not expected. They can sell calls and make money from the premium they will charge for the calls knowing that they would not have to sell any stock to the holder as the value will not appreciate.
Answer:
B. firms currently making pizza will switch to making calzones
Explanation:
