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Assume the U.S. interest rate is 7.5%, the New Zealand interest rate is 6.5%, the spot rate of the NZ$ is $.52, and the one year forward rate of the NZ$ is $.50. At the end of the year, the spot rate is $.48. Based on this information, what is the effective financing rate for a U.S. firm that takes out a one year, uncovered NZ$ loan? SHOW ALL WORK
A) about –1.7%.
B) about 0.0%.
C) about 14.7%.
D) about 15.4%.
E) about 8.3%.
Tom tells Bob that he will pay Bob $5,000 to put a cherry bomb in his gas tank so that Tom can collect money from the insurance policy on a new, cherry red sports car. If Bob carries out Tom’s wishes and places a cherry bomb in the gas tank of Tom’s ..
Create an original example to demonstrate how an individual or firm acting out of self interest
A company's 5-year bonds are yielding 9.65% per year. Treasury bonds with the same maturity are yielding 6.2% per year, and the real risk-free rate (r*) is 2.15%. The average inflation premium is 3.65%, and the maturity risk premium is estimated to b..
What additional assumptions (to the main three) are important when applying the Capital Asset Pricing Model and what are the underlying strengths and weaknesses of this application? Discuss the reliability of the model and give examples in your expla..
Consider the following cash flows: Year Cash Flow 0 −$31,000 1 17,300 2 15,200 3 10,600 Requirement 1: What is the profitability index for the above set of cash flows if the relevant discount rate is 10 percent? (Do not round intermediate calculation..
What is the present value of $1,500 received for 24 months in arrears, followed by $1,200 received for 36 months in arrears, if the annual discount rate appropriate is 9.25%?
Now that the board members of Felicia & Fred are planning to implement a new crystal jewelry product line, they are concerned about potential shareholder sentiment regarding the dilution of ownership interest. What is the likely effect on the weighte..
What should current Kroger stock’s price be if Kroger pays $1.50 as dividend per stock for this year? Find Kroger’s price at year 2 (P ^_2) when dividend becomes constant at 2%, using discount dividend model.Find Kroger’s price at year 0 (P ^_0), usi..
You have the chance to participate in a project that produces the following cash flows: The internal rate of return is 10%. If the opportunity cost of capital is 11%, what is the NPV of the project?
Your company is planning to borrow $0.5 million on a 3-year, 8%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the second year will represent repayment of principal?
This year, Hamilton, a local manufacturer of off-shore drilling platforms, entered into a contract to construct a drilling platform that will be placed in the North Atlantic Ocean. The total contract price is $5,000,000, and Hamilton estimates the to..
Which MACRS (Modified Accelerated Cost Recovery System) depreciation method is used to provide a lesser extend for tax deduction purpose?
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