DISCUSSION 1:

Imagine that you have decided you need a new car, but not any car will do; you have decided to purchase the car of your dreams. Conduct some research as to the cost of this car.  You have determined in this imagined scenario that you could afford to make a 10% down payment.  You can borrow the balance either from your local bank using a four-year loan or from the dealership’s finance company.  If you purchase from your dealership’s finance company, the APR will be 10% with your 10% down and monthly payments over three years. However, the dealership will give you a rebate of 5% of the car price after the three year term is complete.  You want the best deal possible, so you consider the following questions:

• What type of car have you selected, and what will it cost?
• What is the interest rate from your local bank for a car loan for four years?
• What will your payment be to your local bank, assuming your 10% down payment? Be sure to use the formula provided in Chapter 4 and show your work. How much will that car have cost in four years?
• What will your payment be to the dealership finance company assuming your 10% down payment? Be sure to use the formula provided in Chapter 4 and show your work. How much will that car have cost in 3 years?
• Which is the better deal and why?

DISCUSSION 2:

Go to the Yahoo Finance Bonds Center.

1. Under: Bonds Center click Bond Screener:
2. Click the Corporate check box under Bond Type then click Find Bonds.
3. Choose any bond.

Assume interest rates for bonds today is 5% for an AAA rated bond. Calculate the price of the bond you have selected relative to the 5%. Is the bond selling at a premium or a discount? Why? Be sure to show how you arrived at your answer.  What other factors may influence the value of a bond? 

Journal:

We examined two important topics in finance this week: (a) present and future values and (b) security valuation.

Critically reflect on the importance of present and future values.  What factors must be considered when calculating present and future values? What other qualitative factors play into present and future value decisions? Perhaps you have opportunities in your professional life to use present and future values. What are some real or potential applications of these concepts?

We also looked at expected returns. Why do bond values go down when interest rates go up? Is this true in the opposite direction?

Assignment:

Teaching Net Present Value (NPV) & Future Value (FV)

You have been asked by a manager in your organization to put together a training program explaining Net Present Value (NPV) and Future Value (FV) and how they are used to evaluate the price of stock. You have been given the following objectives:

Upon completing your Net Present Value (NPV) and Future Value (FV) Training Program, employees should be able to do the following:

• Explain NPV and FV.
• Describe the factors that are used in the NPV and the FV formulas.
• Give an example of how to use the formulas for NPV and FV for a stock purchase.
• Summarize the differences between the two formulas and the purpose of using each.

Develop a 10- to 12-slide PowerPoint Presentation (excluding title slide and reference slide) that cover each of the above topics. In the slide notes, include your explanations for each topic above. You must use a minimum of two scholarly sources. Format the presentation and cite your resources according to the APA 6th edition style guide as outlined in the Ashford Writing Center.

QUIZ:

1. Which of the following statements is NOT true about future values? (Points : 1)