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A is a U.S.-based MNC with AAA credit; B is an Italian firm with AAA credit. Firm A wants to borrow €1,000,000 for one year and B wants to borrow $2,000,000 for one year. The spot exchange rate is $2.00 = €1.00, a swap bank makes the following quotes for 1-year swaps and AAA-rated firms against USD LIBOR: USD Euro Bid: 8% Bid: 6% Ask: 8.1% Ask 6.1% The firms external borrowing opportunities are: Euro borrowing | USD Borrowing a. 7% (euro) 8%(usd) b. 6% (euro) 9%(usd) 1) How many basis points (bp) can firms A and B each save by entering into currency swaps? 2) How many bp will the swap bank earn? Please show work.
Security I has a beta of 1.3, the risk-free rate is 4%, and the expected return on the market is 11%. What is the expected return for Security I?
Obesity is perceived to be a national health problem in the United States. One suggestion to deal with this problem is a “fat tax.” The idea is to levy a tax on foods containing more than a government prescribed percentage of the daily minimal fat in..
What is the diversifying among different kinds of assets know as?. a) Portfolio funding. b) capital asset classification. c) Asset allocution. d) Multi-diversification.
If it could be shown that a using GDP is associated with a rising level of anxiety, tension, and conflict in the population, would you favor deducting these psychological cost to obtain the true value of gross domestic product? How would you do so? H..
Mace Auto Parts Company sells to retail auto supply stores on credit terms of "net 60". Annual credit sales are $300 million (spread evenly throughout the year) and its accounts average 28 days overdue. The firm's variable cost ratio is 0.75 (i.e., v..
You are an assistant manager at Premiere Movie Source, an online company that enables customers to download movies for a fee. You need to track movie download sales by genre. You gathered the data for November 2016 and organized it in an Excel workbo..
Concrete construction has a return on assets (ROA) of 5 percent, a 2 percent profit margin, and a return on equity (ROE) OF 11 percent. What is its equity multipler?
The $1,000 face value bonds of Jasper International have a 7.5 percent coupon and pay interest annually. Currently, the bonds are quoted at 98.27 and mature in 3.5 years. What is the yield to maturity?
Cookie Dough Manufacturing has a target debt-equity ratio of .6. Its cost of equity is 16 percent, and its pretax cost of debt is 9 percent. What is the firm's WACC given a tax rate of 34 percent? 12.23 percent 12.78 percent 13.11 percent 13.48 perce..
From the scenario, analyze TFC’s cash budget to determine key methods in which the budget may be optimized (e.g., by renegotiating terms and conditions on some of its payables, etc.). If you believe that there is room for improvement, recommend key s..
Find the assessed value of a home with a market value of $175,000 if the assessed valuation is 35% of the market price. Find the property tax on a home with an assessed value of $85,000 if the property tax rate is $11.25 per $1,000 of the assessed va..
Suppose AA-rated 10-year corporate bonds need a default risk premium of 1.25%. Also, these corporate bonds have a 0.75% liquidity premium and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.2%. Suppose 10-year T-bonds have..
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