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1. Triangular arbitrage. Explain the concept of trian- gular arbitrage and the scenario necessary for it to be plausible.
2. Triangular arbitrage. Assume the following information:
Quoted Price
£0.60
Value of New Zealand dollar in British pounds
£0.20
Value of Canadian dollar in New Zealand dollars
NZ$3.02
Given this information, is locational arbitrage possible? If so, explain the steps involved in locational arbitrage, and compute the profit from this arbitrage if you had £1 000 000 to invest. What market forces
Given this information, is triangular arbitrage possible? If so, explain the steps that would reflect triangular arbitrage, and compute the profit from this strategy if you had £1 000 000 to invest.
What market forces would occur to eliminate any further possibilities of triangular arbitrage?
Compute the effective cost of not taking the cash discount under the following trade credit terms:
Calculate the present value of the following cash flows discounted at 10 percent.
Fairway Golf Corporation has a beta of 1.2. If the three-month Treasury bills currently yield 2.9 percent and the market risk premium is estimated to be 5.2 percent, what is Fairway’s cost of equity capital?
A firm is undertaking a project with the following details provided. The project costs $2.5 million and has a five-year service life. Determine the end of year cash flows for years 0 through 5? Compute the Net Present Worth for this 5-year project?
On July 1, Year 1, the board of directors of All Seasons Sports, Inc. voted to dispose of the Ski & Snowboard operating segment of the company. On that date, the carrying value of the segment was $3,000,000, but the Board believed that it could sell ..
A project has an initial outlay of $1,160. It has a single payoff at the end of year 6 of $9,960. What is the profitability index (PI) of the project, if the company’s cost of capital is 11.37 percent?
Blaney Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost drivers), namely guests and jeeps. Prepare the company's flexible budget for the actual level of activit..
Frederickson Office Supplies recently reported $12,500 of sales, $7,250 of operating costs other than depreciation, and $1,250 of depreciation. The company had no amortization charges and no non-operating income. It had $8,000 of bonds outstanding th..
Fill in the missing numbers in the following income statement: What is the depreciation tax shield?
You construct a price-weighted index of 78 stocks. At the beginning of the day the index is 9,364.36. During the day, 77 stock prices remain the same, and one stock price increases $4.30. At the end of the day, your index value is 9,417.95. What is t..
The firm estimates the revenues and expenses for the new and the old lathes to be as shown in the following table. The firm is subject to a 40% tax rate. Should the new lathe be purchased?
Your firm is contemplating the purchase of a new $545,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $53,000 at the end of that time. You will save $295,000 before..
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