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Toyota motor credit corporation (TMCC), a subsidiary of Toyota Motor Corporation, offered some securities for sale to the public on March 28, 2008. Under the terms of the deal TMCC promised to repay the owner of one of the three securities $100,00 on March 28,2038, but investors would receive nothing until then. Investors paid TMCC $24,099 for each of these securities: so they gave up $24,099 on March 28, 2008, for the promise of a $100,00 payment 30 years later.
6. Time Value of Money Why would TMCC be willing to accept such a small amount today ($24,099) in exchange for a promise to repay about four times that amount ($100,000) in the future?
9. Investment Comparison Suppose that when TMCC offered the security for $24,099 the U.S Treasury had offered an essentially identical security. Do you think it would have had a higher or lower price? Why?
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