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Suppose that the term structure of risk-free interest rates is flat in the United States and Australia. The USD interest rate is 7% per annum and the AUD rate is 9% per annum. The current value of the AUD is 0.62 USD. Under the terms of a currency swap agreement, a financial institution pays 8% per annum in AUD and receives 4% per annum in USD. The principals in the two currencies are $12 million USD and 20 million AUD. Payments are exchanged every year, with one exchange having just taken place. The swap will last two more years. What is the value of the swap to the financial institution? Assume all interest rates are continuously compounded. Please show your work.
Broussard Skateboard's sales are expected to increase by 20% from $7.8 million in 2016 to $9.36 million in 2017. Its assets totaled $5 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as proj..
Suppose that the pension fund you are managing is expecting an inflow of funds of $100 million next year and you want to make sure that you will earn the current interest rate of 8% when you invest the incoming funds in long-term bonds. How would you..
JJ Industries will pay a regular dividend of $0.75 per share for each of the next four years. At the end of four years, the company will also pay out a liquidating dividend. If the discount rate is 12 percent, and the current share price is $75, what..
Dream House $1,724,000. What is the payment for your house loan for a 30 year loan with a rate 3.3%. What is the payment for your house loan for a 15 year loan with a rate 2.7% How much will you pay overall for your dream house for the 30 year loan a..
A machine will reach the end of its useful life in year 5. The realizable salvage value is expected to be $50,000 with a book value of zero. The company's marginal tax rate is 34%. What is the tax implication on the sale of the new machine at year 5?
What % of the bottles will be considered under filled? Compute and interpret the machine's Cp. Compute and interpret the machine Cpk.
You have a portfolio which has an average return of 10.3 percent. In any given year, you have a 2.5 percent probability of earning either a zero or a negative annual return. What is the approximate standard deviation of your portfolio?
Ciba Inc`s expected Yield is 4%. The capitalization rate is 3.25% and the overall cost of debt is 1.85%. If the market value of debt is 3M…what is the market value of Equity?
The 2013 income statement for Lou's Shoes shows that depreciation expense is $2 million, EBIT is $5 million, EBT is $3 million, and the tax rate is 40 percent. At the beginning of the year, the balance of gross fixed assets was $16 million and net op..
Timothy Clum is in the 25 percent tax bracket and is considering the tax consequences of investing $2,000 at the end of each year for 30 years, assuming the investment earns 8 percent annually. What is the amount of earnings that Timothy gives up by ..
George bought a European put option contract in UWY stock from Julie with a striking price of $34.68 per share. He paid $0.67 per share for this option contract. The size of the contract was 100 shares. Suppose the market price of UWY stock was $32.8..
The weighted-average cost of capital for a firm with a 65/35 debt/equity split, 8% pre-tax cost of debt, 15% cost of equity, and a 35% tax rate would be: What is the pretax cost of debt for a firm in the 35% tax bracket that has a 10% aftertax cost o..
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