1. Someone offers to buy your car for four, equal annual payments, beginning 2 years from today. If you think that the present value of your car is $9,000 and the interest rate is 10%, what is the minimum annual payment that you would accept? How to solve this problem on BAII Plus
A. $2,839.24
B. $3,435.48
C. $3,123.16
D. $2,250
2. If a company's bonds are selling at a discount, then:
a. The YTM is the return investors probably expect to earn.
b. The YTC is probably the expected return.
c. Either a or b could be correct, depending on the yield curve.
d. The current yield will exceed the expected rate of return.
e. The after-tax cost of debt to the company will have to be less than the coupon rate on the bonds.