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Question:
(a) Describe the Interest Rate Parity Theory.
(b) A company needs to pay in 3 months USD 1 million. The USD are already at disposal in the company, thus the company decides how to invest them in the given period. You have the following data:
$ 3-month deposit rate: 8% (annualised) £ 3-month deposit rate: 10% (annualised) Direct quotes: Spot rate: $1,80/£ 3-month forward rate: $1,78/£
By giving detailed reasoning, answer the given questions:
(i) Where should the company invest in the USA or in UK?
(ii) Consider that the interest rates and the spot rate stay the same, what forward rate ensure that there is no arbitrage?
The price of the pound sterling in Paris is Euros 1.2724 and 2.0556 CHF in Zürich. In Frankfurt we can come across with the exchange rate Euro 0.6338/CHF.
(i) How is it possible for an arbitrageur from London to realize profits? Describe.
(ii) All else being equal, which rate in Paris would ensure the no arbitrage condition?
Determine The key factor affecting financing Costs Because cost of capital is measured under the assumption that both firm's asset structure and its capital (financial) structu
Revenue Recognition or Realisation The resources of business are utilized to earn revenue through sale of goods or rendering of services.The American Accounting Association d
Why is capital budgeting analysis so important to the firm? The major goal of the financial manager is to maximize shareholder wealth. Capital investments along with positive N
can you help?
What is the primary advantage to a corporation of investing some of its funds in working capital? By investing in working capital a firm acquires the liquidity it needs helpin
a. The primary financial objective of a company is the maximization of the wealth of shareholders ...per corporate finance theory. Though, this objective is usually replaced by
discuss the applicability of operating cycle in poultry industry[consider broilers]
Sensitivity Analysis A test of an organizations performance projections based on varying the key assumptions which is used for forecast performance.
a) Year 2 Year 1 Stock turnover (350/500) * 365 = 255.5 days (250/450) * 365 = 202.7 days
Q. Explain Risk Adjusted Discount Rate Method? In the risk adjusted discount rate method the future cash flow from capital projects are discount at the hazard adjusted discount
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