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The current Dollar-Pound exchange rate is 1.60 dollars per British Pound. The U.S. and British risk-free interest rates (annualized, continuously compounded) are 5% and 7.5%, respectively. Answer the following questions.
A. What is the no arbitrage forward price of the British Pound for a 6-month forward contract?
B. Suppose the actual forward price is 1.65 dollars per British Pound. Illustrate the arbitrage opportunity.
The common stock of the Tangerine Tube Company is currently selling for $75 a share. Under the terms of a rights offering, the present stockholders will be able to purchase a share at $60 a share for each 5 shares of common held. What is the theoreti..
What is the market value of the stock after the rights offering? what is your investment in the firm after the rights offering?
What are the key reasons for most business failures? What are some ways to mitigate these risks? Sometimes early adopters pay a hefty price to be one of the first to own a tool or technology. Can you think of an example where the price of a good or s..
Using 14% as the cost of common equity calculate the wacc.
Which payer type saw enrollees have the biggest spending increase in 2015?
The newspaper reported last week that Bradley Enterprises earned $2 per share this year. Bradley retains 60 percent of its earnings to reinvest in the company, where the return on the reinvestment is 14 percent. The cost of capital of Bradley is 12 p..
Write a brief overview concerning stock valuation. A brief explanation of the legal rights and privileges of common stockholders.
A short forward contract that was negotiated some time ago will expire in three months and has a delivery price of $40. The current forward price for three-month forward contract is $42. The three month risk-free interest rate (with continuous compou..
Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Since both forklifts perform the same function, the firm will choose only one. Calculate the NPV for each type of truck. Ro..
Find the Intrinsic Value of the Colgate/Palmolive Company, and provide a brief summary. Compare the current stock price to the intrinsic value. Would you hold onto this stock, or sell this stock? Why?
Put-Call Parity. A put option and a call option with an exercise price of $55 expire in two months and sell for $2.65 and $5.32, respectively. If the stock is currently priced at $57.30, what is the annual continuously compounded rate of interest?
There have been some media reports that the bank may not have enough capital to survive the next six weeks. What risk do you face and what could happen?
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