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The following rates are available in the markets: Current spot exchange rate: $1.000/SFr Current 30-day forward exchange rate: $1.010/SFr Annualized interest rate on 30-day dollar-denominated bonds: 12% (1.0% for 30 days) Annualized interest rate on 30-day Swiss franc-denominated bonds: 6% (0.5% for 30 day
a. Is the Swiss franc at a forward premium or discount?
b. Should a U.S.-based investor make a covered investment in Swiss franc-denominated 30-day bonds, rather than investing in 30-day dollar-denominated bonds? Explain.
c. Because of covered interest arbitrage, what pressures are placed on the various rates? If the only rate that actually changes is the forward exchange rate, to what value will it be driven?
A firm’s existing assets have an expected return of 16% and an associated standard deviation of 20%. A proposed project has an expected return of 26% and an associated standard deviation of 30%. The covariance between the existing firm and the projec..
Long-term revenue forecasts:
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What is the monthly break even point for the number of pints made and sold to the nearest integer? ________
Titusville has $2 million in receivables that can be pledged as collateral. The average collection period is 45 days. Determine the annual financing cost to Titusville of this receivables-backed loan.
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Nicki Corporation's value of operations is equal to $500 million after a recapitalization (the firm had no debt before the recap). It raised $150 million in new debt and used this to buy back stock. Nicki had no short-term investments before or after..
Statement of Cash Flows W.C. Cycling had $54,000 of cash at year-end 2011 and $11,000 in cash at year-end 2012. The firm invested in property, plant, and equipment totaling $130,000. Cash flow from financing activities totaled +$160,000. Round your a..
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A company's stock currently sells for $59.57. The company EXPECTS to pay a dividend in one year of $1.75. The analyst's estimate of the company's future growth prospects is that the company will grow at a constant rate of 4%. What is the market's req..
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