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1. If the current 180 day inter-bank Eurodollar rate is 15% (all rates are started on an annualized basis, and next period’s LIBOR is 13%, then a Eurocurrency loan priced at LIBOR plus 1% will cost
16% this period and 16% next period
15% this period and 14% next period
16% this period and 14% next period
15% this period and 15% next period
2. Suppose affiliate A sells goods worth $1 million monthly to affiliate B on 30 day credit terms. A switch in credit terms to 60 days will involve a one time shift in cash of
$ 3 million from A to B
$ 3 million from B to A
$ 1 million from A to B
$ 1 million from B to A
3. SCI borrows SFr 1.5 million from credit Suisse for one year at 9.3% interest. Interest is prepaid. What is the effective SFr interest rate on SCI’s loan?
10.86%
13.64%
10.25%
10.50%
Suppose the average return on Asset A is 6.3 percent and the standard deviation is 7.5 percent and the average return and standard deviation on Asset B are 3.4 percent and 3.0 percent, respectively. In a particular year, the return on Asset A was −4...
Software games company Avalanche Entertainment is considering expanding its highly successful online game franchise to either the board game or trading card environment. The company has decided that it will invest in one project but not both. The ..
Kirk Faust just won the state lottery which promises to pay him $1,500 per year for 20 years, starting from today, and $1,850 per year for years 21-45, given a 6.75% discount rate. Your company wants to purchase the proceeds from the lottery from Kir..
Identify two possibly mispriced bond issues, one overpriced and one underpriced. and graph the bond yield to maturity (YTM) on the y-axis of an XY-scatter plot, with the bond to maturity in years on the x-axis.
Describe how Bach could use a long strangle to hedge its possible dirham positions. What is the tradeoff involved in using a long strangle versus a long straddle to hedge the positions?
What is the net present value of a project that has an upfront cash outlay of $30,000, and generates cash inflows of $15,000 in year 1, $20,000 in year 2, and $25,000 in year 3 assuming that the company’s cost of capital is 15% per year? (Show calcul..
Bond value and changing required returns Midland Utilities has outstanding a bond issue that will mature to its $1,000 par value in 12 years. The bond has a coupon interest rate of 11% and pays interest annually. Plot your findings in part a on a set..
Eastern Shore Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $10,000 per year forever. If the required return on this investment is 5.5 percent, how much will you pay for the policy?
Penston Company owns 40 percent (40,000 shares) of Scranton, Inc., which it purchased several years ago for $182,000. Since the date of acquisition, the equity method has been properly applied, what income effects would be reported from its ownership..
Last year, you purchased a $1,000 par value bond with a 7.5% annual coupon and a 20-year maturity. At the time of the purchase, it had an expected YTM of 8%. After receiving the coupon, you sold the bond today for $930. What is your return rate in on..
Define transactions banking and relationship banking. Which types of financial institutions most aggressively pursue each of these business models?
Elaborate on each type of benefit. Which motives for FDI do you think encouraged Nike (a US company) to expand its footwear production in Latin America?
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