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1. A speculator is considering the purchase of two three-month British pound call options with a striking price of $1.59 per £. The premium is $0.03 per pound. The standard size of each option contract is 10,000 pounds.
(a) Determine the future spot price at which the speculator will only break even.
(b) What would be the speculator’s profit if the pound depreciates to $1.57 per £? (Please include currency symbols $, £ in your answer)
2. Microsoft would like to borrow pounds, and Boots wants to borrow dollars. Because Microsoft is better known in the United States, it can borrow on dollars at 6% and pounds at 7.5%, whereas Boots can on its own borrow dollars at 6.4% and pounds at 7.1%. Suppose Microsoft wants to borrow £2 million for two years, Boots wants to borrow $3.2 million for two years, and the current ($/£) exchange rate is $1.60/£. What swap transaction would accomplish this objective? Assume the counterparties would exchange principal and interest payments with no rate adjustments.
(Please include currency symbols $, £ in your answer)
The State News had net income of $357 of which 40% was distributed to shareholders as dividends. During the year, the company issued new common stock, amounting in $93. What is the cash flow to stockholders?
Fooling Company has a 11.8 percent callable bond outstanding on the market with 25 years to maturity, call protection for the next 10 years, and a call premium of $50. What is the yield to call (YTC) for this bond if the current price is 108 percent ..
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part a consider the information below from a firms balance sheet for 2011 and 2012.current assets20122011change cash
According to the unbiased expectations theories,
Solar Engines manufactures solar engines for tractor-trailers. Calculate the NPV of the decision to grant credit.
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What is the current value of this preferred stock? What was the original issue price?
Time for a lump sum to double If you deposit money today in an account that pays 14% annual interest, how long will it take to double your money? Round your answer to two decimal places. How many years?
You want to have $78,000 in your savings account 12 years from now, and you’re prepared to make equal annual deposits into the account at the end of each year. If the account pays 6.80 percent interest, what amount must you deposit each year?
The asset will be depreciated by three-year MACRS. Using the generalized cash flow approach, determine the cash flow after taxes.
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