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Why might you expect interest rate movements of various industrialized countries to be more highly correlated in recent years than in earlier years? #2 Assessing Interest Rate Differentials among Countries. In some countries where there is high inflation, the annual interest rate is more than 50 percent, while in other countries such as the U.S. and many European countries, the annual interest rates are typically less than 10 percent. Do you think such a large interest rate differential is primarily attributed to the difference in the risk-free rates or to the difference in the credit risk premiums between countries? Explain. #3 After-tax Yield. You need to choose between investing in a one-year municipal bond with a 7 percent yield and a one-year corporate bond with an 11 percent yield. If your marginal federal income tax rate is 30 percent and no other differences exist between these two securities, which one would you invest in? #4 Deriving Current Interest Rates. Assume that interest rates for one-year securities are expected to be 2 percent today, 4 percent one year from now and 6 percent two years from now. Using only the pure expectations theory, what are the current interest rates on two-year and three-year securities? #5 POINT/COUNTER-POINT: Should a Yield Curve Influence a Borrower's Preferred Maturity of a Loan? POINT: Yes. If there is an upward-sloping yield curve, a borrower should pursue a short-term loan to capitalize on the lower annualized rate charged for a short-term period. The borrower can obtain a series of short-term loans rather than one loan to match the desired maturity. COUNTER-POINT: No. The borrower will face uncertainty regarding the interest rate charged on subsequent loans that are needed. An upward-sloping yield curve would suggest that interest rates will rise in the future, which will cause the cost of borrowing to increase. Overall, the cost of borrowing may be higher when using a series of loans than when matching the debt maturity to the time period in which funds are needed.
Problem 1:Kali Manufacturing Inc. began the year with the following. Units ,beginning work-in-process 20,000 20% complete,Transferred to finished goods 60,000 ,Ending inventory 10,000 70% complete,Materials added at the beginning of the proceRequired..
selected financial data of two competitors target and wal-mart are presented here. all dollars are in
If the company follows the residual dividend model, how much net income must it earn to meet its capital budgeting requirements and pay the dividend, all while keeping its capital structure in balance?
Often DCF(discounted cash flow) approaches to valuation are unattractive because of the subjective nature of the CF estimates. In industries where "standard" Valuation multiples are available, they are an alternative to DCF analysis. Consider the fol..
Calculate Brauer's debt ratio assuming the firm uses only debt and common equity. Round your answer to two decimal places.
Explain Porter's five forces model. What are the four competitive strategies firms can choose from according to Porter's model?
Stock A has the given probability distribution of expected returns. Determine Stock A's expected rate of return and standard deviation?
You have seen a credit card advertisement stating that the annual percentage rate is 12 percent. If the credit card requires monthly payments, what is the effective annual rate of interest on the loan?
A proposed new investment has projected sales of $836,000. Variable costs are 56 percent of sales, and fixed costs are $187,540; depreciation is $96,500. Assume a tax rate of 40 percent.
First National agrees to act as Interstate's mortgagee, and Interstate obtains an insurance policy from Good Hands to cover the property. A fire totally destroys the warehouse.
What does the historical record of interest rates and inflation in the United States look like? Explain in details with references to text book.
analysis of a chosen article from wall street journal. the article should have been published no more than a month ago.
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