Question

TMCC, a subsidiary of Toyota motor, offered some securities for sales to the public on March 28,2008. Under the terms of the deal, TMCC promised to repay the owner of one of these securities $100,000 on March 28,2038, but investors would receive nothing until then. Investors paid TMCC $24,099 on March 28, 2008, for the promise of a $100,000 payment 30 years later.

The TMCC security is bought and sold on NYSE. If you looked at the price today do you think the price would exceed the $24,099 original price? If you looked in the year 2019, do you think the price would be higher or lower than today's price? Why?

Answer 1

The price of the TMCC security may exceed the original price of $24,099 due to changes in factors such as interest rates and market conditions. The price in 2019 could be higher or lower depending on these factors and the financial health of TMCC.

Step-by-step explanation:

Based on the information provided, the TMCC security offered by Toyota Motor Corporation is a long-term investment that promises a $100,000 payment 30 years later. When determining the price of a security, investors consider factors such as interest rates, market conditions, and the financial health of the issuing company. Therefore, today's price of the TMCC security may exceed the original price of $24,099 due to changes in these factors.

In the year 2019, it is difficult to predict with certainty whether the price would be higher or lower than today's price without additional information. However, it is possible that the price could be higher if interest rates have decreased or if TMCC has improved its financial condition. On the other hand, if interest rates have increased or if TMCC's financial health has deteriorated, the price could be lower.