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As the money manager of Boston Bank you have $1,000,000 available for six months. You have the opportunity to lend the fund in U.S. or lend the fund to prospective customers in Montreal or Landon.
Use the following information to answer this problem: (45Points)
- Present spot rate: $1.7120/ $0.8861/C$
- Six month forward rate: $1.6726/ $0.8742/C$
- Interest rate in U.S. is 8.00% annual- Interest rate in U.K. is 10.5%- Interest rate in Canada is 9.5%
a. Are interest rates and forward rates in equilibrium? Why or why not? Show your work.b. Where should you invest for maximum yield?c. What forward rate would create an equilibrium situation associated with investing in U.S. or Canada?d. Would your decision about where to invest change if the U.K. interest rate was 15%?e. If there is an arbitrage opportunity, for a transaction size of U.S. $1,000,000, (or 1,000,000) that you can borrow, how can you take advantage of the situation without taking undue risks? Show your work and profit or losses.
Projecting gross profit - the effects of volume versus price and Suppose you are analyzing a firm that is successfully executing strategy that differentiates its products from those of its competitors.
Compare your estimate of intrinsic value with the stock's actual price and would you be willing to make an investment decision on the basis of your research?
A clunker that travels 12,000 miles a year at fifteen mpg uses 800 gallons of gas a year. A vehicle that travels 12,000 miles a year at 25 mpg uses 480 gallons a year.
Determine whether this project will be profitable for the company. The board of directors requires all project analyses to include the net present value, internal rate of return, payback and profitability index.
A $150,000 loan is to be amortized over seven years, with yearly end of year payments. Find the correct statements.
Theory questions regarding stock exchange - Is the control issue likely to be of more importance to stockholders of publicly owned or closely held firms? Explain
You sat in CEO chair and studies real world hospital accounts receivable problem with your team, & came up with a process improvement plan to reduce days in accounts receivable & improve cash flow to your hospital.
Forecasting revenue from sales based on projected net income and operating costs - What level of sales would generate $2,500,000 in net income?
Calculation of Increase in Sales, Dividend Payout ratio - Find Cranberry Corporation's addition to retained earnings with a 10% increase in sales? Assume the dividend payout ratio and profit margin remains fixed.
The Litton Corporation has established Standards as follows:
Analysis of the business risk of the company and analysis of the systematic risk of the company over the last 5 years.
Preparation of Performa Balance Sheet from the given ratios and other information - Find the specific option available to the company for meeting its resource needs if the bank provided a loan of $200,000 as sought by the company?
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