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Assume that annual interest rates are 5 percent in the United States and 4 percent in Turkey. An FI can borrow (by issuing CDs) or lend (by purchasing CDs) at these rates. The spot rate is $0.6647/Turkish lira (TL).
A. If the forward rate is $0.6735/TL, how could the bank arbitrage using a sum of $8 million? What is the spread earned?
B. At what forward rate is the arbitrage eliminated?
Maese Industries had warrants outstanding that permit the holders to purchase one share of stock per warrant at a price of $25. We are to assume the firm’s stock now sells for $20 per share. The company wants to sell some 20-year, $1000 par value bon..
Parry Electronics is a regional electronics wholesales and distributor that earned $1,250,000 in EBITDA this year based on revenues of $4,000,000. The enterprise values of publicly traded firms that operate in the same industry currently are valued a..
Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by three ..
Carla Lopez deposits $7980 a year into her retirement account. If these funds have an average earning of 3 percent over the 19 years until her retirement, what will be the value of her retirement account?
Sales from the contract are forecast at $380,000 each year. Variable costs are estimated at $250,000 the first year, and Jo believes they will decrease at the rate of $5000 per year, as they become expert in growing the new items in the new greenhous..
Suppose the 90-day forward quotes on the Euro and the Danish kroner are $ 0.4002-10 and $0.1180-90, respectively. What is the direct 90-day forward quote for the kroner Frankfurt?
Assets and costs are proportional to sales. Debt and equity are not. A dividend of $2,500 was paid, and Martin wishes to maintain a constant payout ratio. Next year’s sales are projected to be $42,300. What is the external financing needed?
Briefly describe (one paragraph each) the basic operations of— and the products and services offered by—each of the following financial institutions: (a) commercial bank, (b) savings and loan association, (c) savings bank, (d) credit union, (e) stock..
Bankers Corp has a very conservative Beta of .7, while Biotech Corp has a Beta of 2.1. Given that the T-bill rate is 5%, and the market is expected to return 15%, what is the expected return of Bankers Corp, Biotech Corp, and a portfolio composed of ..
Suppose that a US interest rate is 4% and the forward rate for the Korean won is 1 won = $0.001 and the spot rate is 1 won = $0.0011. What is the interest rate in the Korean market? (Assume that the US is home and the interest rate parity holds.) Ple..
The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service. What is the project's operating cash flow for the first year
Guy A bought a share of stock at the beginning of 2011 and sold this share of stock at $45 today (end of 2011). During this holding period, he received $5 cash dividend. His holding period return, capital gain yield and dividend yield are __, __, and..
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