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Suppose, the current spot rate for US Dollar ($) against the Australian Dollar (A$) is $0.7268/A$, while the six-month forward rate is $0.7033/A$. An investor expects that the spot rate will be $0.6800/A$ in the next six months. The investor has two choices. Either he can invest $100,000 or he can invest A$100,000.
i. Calculate the investor's expected profit assuming a pure spot-market speculation strategy. In your calculation, indicate whether the investor is to invest $100,000 or A$100,000.
ii. Calculate the investor's expected profit assuming purchase or sale of the six-months forward. In your calculation, indicate whether the investor is to invest $100,000 or A$100,000.
Shi Importers' balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi's tax rate is 40%, rd = 7%, rps = 7.9%, and rs = 14%. If Shi has a target capital structure of 30% debt, 5% preferre..
Identify which currencies have gained in value against the US dollar (USD) over the previous year. Explain your selection - Calculate the cross exchange rate between British Pounds (GBP) and Roubles (RUB).
Rhiannon Corporation has bonds on the market with 22.5 years to maturity, a YTM of 6.90 percent, and a current price of $1,057. The bonds make semiannual payments. What must the coupon rate be on these bonds?
Firms HL and LL are identical except for their leverage ratios and the interest rates they pay on debt. Each has $16 million in invested capital, has $2.4 million of EBIT, and is in the 40% federal-plus-state tax bracket. Calculate the return on inve..
A firm expects to increase its annual dividend by 20 percent per year for the next two years and by 15 percent per year for the following two years. After that, the company plans to pay a constant annual dividend of $3 a share. The last dividend paid..
At an output level of 62,000 units, you calculate that the degree of operating leverage is 3.70. Suppose fixed costs are $280,000. What is the operating cash flow at 56,000 units? What is the new degree of operating leverage?
Identify any consumer product or service that you'd like, and explain who the target market is (or should be) for it. What are the key market segmentation variables (age, gender, educational level, geographic location, etc.) in defining the target ma..
You have the following bond: $10,000 par value, Coupon of 8.5%, semi-annual compounding, Maturity of 13 years, MKT Rate of Interest of 11.65%. Bond is callable in 6 years with a Call Premium of $500. What is the Nominal Yield to Call?
The payback period is not concerned with
Securities can be traded on physical exchanges or in the over-the-counter market. Define each of these markets, and describe how stocks are traded in each one.
Companies often try to keep accounting earnings growing at a relatively steady pace in an effort to avoid large swings in earnings from period to period. They also try to manage earnings targets. What are two tactics that a financial manager can use ..
You want to have $83,000 in your savings account 11 years from now, and you’re prepared to make equal annual deposits into the account at the end of each year. If the account pays 6.30 percent interest, what amount must you deposit each year?
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