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A foreign exchange dealer has $1 million for a short-term money market investment. That is, he wants minimal risk in his investment, but he still wants to maximize the available return. Given the following market rates in the U.S. and London, what would you recommend? Why? And what is the annualized rate of return for your recommended investment?
Spot exchange rate £1.2810/$
3-month forward rate £1.2740/$
3-month U.S. interest rate 4.800% p.a.
3-month £ rate 3.200% p.a.
*Note: p.a. stands for per annum, meaning the annualized rate. Assume that 3-months represents exactly one-fourth of the year and make the necessary conversion.
Demand for an item is 100 units a week with a standard deviation of 10 units. Lead time is one week and the reorder level used is 115 units. What is the probability of running out of stock?
The Board Chair is concerned about factors that affect the corporate cost of capital for any business: the level of interest rates, tax rates, capital structure policy, and capital investment policy. Does the tax rate, cost of debt, or cost of equity..
Defines how solvency and liquidity differ and provides an example of two companies. As a financial manager, what can you do to make sure your company stays solvent and is not too liquid?
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Given the following information for the Duke Tire Company, find the firm's debt ratio (i.e., total liabilities / total assets): ROE (N/E) = 0.24 (expressed as a decimal)
Prepare a horizontal analysis for 20X1 and 20X2. Briefly comment on the results of your work
Jim Short's Company makes clothing for schools. Sales in 2013 were $4,820,000. Assets were as follows: Cash ($163,000), Accounts receivables ($889,000) Inventory ($411,000) Net equipment ($520,000) Total assets ($1,983,000):
Mark Goldsmith’s broker has shown him two bonds. Each has a maturity of 5 years, a par value of $1,000, and a yield to maturity of 12%. Bond A has a coupon interest rate of 6% paid annually. Bond B has a coupon interest rate of 14% paid annually. Cal..
Discuss the topic-Should a multinational firm risk overhedging - creditors may prefer that the multinational firms maintain low exposure to exchange rate risk. Consequently, multinational firms that hedge their exposure to risk may be able to borro..
Company Z issued bonds with detachable warrants several years ago. Each warrant allows the holder to purchase one share of stock at $30 per share. The stock has a beta of 1.3. Calculate the exercise value of the warrants if the price of the underlyin..
You agree to make 24 deposits of $500 at the beginning of each month into a bank account. At the end of the 24th month, you will have $13,200 in your account. If the bank compounds interest monthly, what nominal annual interest rate will you be earni..
Size-up HCM using historical ratio analysis and a discussion of its business risk and financial risk and the Q1 tab reproduces HCM's financial statements and forecasts for your convenience.
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