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1. Suppose the spot and six-month forward rates on the Denmark krone are Kr 4.18 and kr. 4.30 respectively. The annual risk-free rate in the United States is 6 percent, and the annual risk-free rate in Denmark is 7 percent.
a) Is there an arbitrage opportunity here? If so, show how would you exploit it?
b) What must the six-month forward rate be to prevent arbitrage?
c) Are exchange rate changes necessarily good or bad for a particular company?
2. A stock sells for $95. A call option on the stock has an exercise price of $90 and expires in 3 months. If the interest rate is 0.15 and the standard deviation of the stock's return is 0.30.
a) Calculate the call using the Black-Scholes model. Show all workings.
b) What would be the price of a put with an exercise price of $120 and the same time until expiration? Show all workings.
Analyse the current financial state of Anthony's Orchard and evaluate the impact of a major customer cancelling their expected order.
Discuss how derivatives could be used to hedge this risk. Explain and provide examples if possible and calculate the appropriate number of bond and equity futures that should be sold.
What is the difference of WACC based on market value weights and book weights - Please show formulas.A balance sheet shows a total of noncallable $45 million.
Problem on financial management.
What will be the net interest payment of VZ for the principal of 100M on each of the dates shown in the above table? Of this amount, how much goes to Citibank?
Discuss the topic- Should the reduced tax rate on dividends affect a multinational firm's capital structure
What is a ruined cost. Why is it important to understand this concept when analyzing capital projects
The project is to study the changing trends of the Indian Markets due to the foreign investments, in particular FIIs, its impact, being the single largest investor class in the Indian Markets with respect to current issues.
VALUE OF CUSTOMER RELATIONSHIP MANAGEMENT
If the Friendly National Bank experiences a required reserves deficit, what actions can it take to be in compliance with the existing required reserves ratio?
Calculate the Internal Rate of return for both projects and again recommend which of the two projects, if any, should be selected based on this information.
What factors affect a firms degree of transaction exposure in a particular currency? For each factor, explain the desirable characteristics that would reduce transaction exposure.
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