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Ford (U.S. company) borrows $15 million in the U.S. capital market at the domestic interest rate of 10 percent per year and SONY (Japanese company) borrows1,650 million Japanese Yen in the Japanese credit market at the foreign interest rate of 6 percent per year. Each party then swaps the principal amount. The principal amounts are equivalent because the spot exchange rate is 110 Japanese Yen/1$. In this way, Ford has now borrowed Yen, and SONY has borrowed dollars. This is a 5 year foreign currency swap contract and interest payments are made once a year. (You know that they will make only net payments.) Suppose the spot exchange is 115 Japanese Yen/1$ at the end of year 1. Calculate which firm owes how much (in $ amount) to the other firm.
The mean arrival rate of flights at O'Hare Airport in marginal weather is 195 flights per hour with a historical standard deviation of 15 flights.
Calculate the required rate of return for Climax Inc., assuming that (1) investors expect a 4.0% rate of inflation in the future, (2) the real risk-free rate is
If LIBOR is currently at 5%, what spread is the bank earning? If LIBOR increases to 7%, what is the new spread the bank is earning?
How is duration related to interest elasticity of a fixed income security? What is the relationship between duration and the price of a fixed income security?
Max and Veronica have no unusual income requirements or health problems. Describe the type of bond investment program you think the Shuman family should follow.
What additional assumptions (to the main three) are important when applying the CAPM and what are the underlying strengths and weaknesses of this application? Discuss the reliability of the model and give examples in your explanation.
If the relevant tax rate is 35 percent, what is the aftertax cash flow from the sale of this asset?
what is the expected exchange rate one year from now based on PPP?
Evaluate microfinance institutions (MFIs) of developing countries in terms of their performance (impact on poverty reduction) and viability (profitability). Provide four evidences (two for each – performance and viability) to support your answer. Ans..
What difference does it make to the value of the bond and the value of the conversion option if the bond is callable any time within the first 2 years for $115?
Pearl, Inc., has offered $602 million cash for all of the common stock in Jam Corporation. Based on recent market information, Jam is worth $575 million as an independent operation. If the merger makes economic sense for Pearl, what is the minimum es..
A stock has an expected return of 13.1 percent, a beta of 1.28, and the expected return on the market is 11 percent. What must the risk-free rate be?
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