A corporate treasurer tells you that he has just negotiated a five-year loan at a competitive fixed rate of interest of 5.2%. The treasurer explains that he achieved the 5.2% rate by borrowing at six-month LIBOR plus 150 basis points and swapping LIBOR for 3.7%. He goes on to say that this was possible because his company has a comparative advantage in the floating-rate market. What has the treasurer overlooked?
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A corporate treasurer tells you that he has just negotiated a five-year loan at a competitive
fixed rate of interest of 5.2%. The treasurer explains that he achieved the 5.2% rate by
borrowing at six-month LIBOR plus 150 basis points and swapping LIBOR for 3.7%. He goes
on to say that this was possible because his company has a
floating-rate market. What has the treasurer overlooked?
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- Martin Shrood purchased a vacant lot outside of London for £13,500, because he heard that a shopping mall was going to be built on the other side of the road. He figured that he could make a bundle by puttingin a fast-food outlet on the site. As it turned out, the rumor was false. A sanitary landfill was located on the other side of the road, and Martin’s land was worthless. (£ denotes the British monetary unit, pounds sterling.)*Required: With respect to the economic characteristics of costs, what type of cost is the £13,500 that Martin paid for the vacant lot?Mary Argent is a foreign exchange trader for a bank in New York. She has Si million (or its Swiss franc equivalent) for a short term money market investment and wonders if she should invest in U.S. dollars for three months, or make a covered interest arbitrage investment in the Swiss franc. She faces the following quotes: $1,000,000 1.2810 Arbitrage funds available Spot exchange rate (SFr./S) 3-month forward rate SFr./$) U.S. dollar 3-month interest rate Swiss franc3-month Interest rate 1.2740 4.800% 3.200% She should Borrow: A 780,600 SF franes (SWISS) B. 1.281.000 USD (US dollars) C. 1.281.000 SF franes (SWISS) D. TBO.000 USD (US dollars)If you would like to replace this table with a chart to display the average price per cup equivalent across fresh apples, applesauce, ready to drink juice, and frozen juice, what encoding method and story would you use? Apples-Average retail price per pound or pint and per cup equivalent, 2016 Preparation Size of a Average price Form Average retail price yield factor cup equivalent per cup equivalent per pound per pound Fresh' $1.62 0.9 0.243 pounds $0.44 Applesauce2 $1.05 $0.57 1 0.540 pounds Juice Ready to drink Frozen 'The USDA National Nutrient Database for Standard Reference (SR) reports that the inedible stem and per pint per pint fl oz fl oz $0.63 1 $0.32 $0.51 1 8 $0.26 core of a raw apple account for 10 percent of the fruit's weight, implying a preparation yield of 90 percent, when apples are eaten raw including the peel. Bars, Ranking Bars, Part to Whole Line, Part to Whole Bars, Nominal Comparison
- Mr.Abdullah specializes on Arbitrage trading. He has got the following quotes regarding 3 currencies GBP 0.739541 / USD AUD 1.3081 / USD GBP 0.563789 / AUD Now he wants to use USD 1000000 and make a profit. Answer the following questions based on the data given above. After converting from USD to GBP and from GBP to AUD, How much will he get in converting AUD to USD in the above process? a. 1715879 b. 1002777.804 c. 739541 d. All the options are wrong e. 1311733.645 After converting from USD to GBP, How much will he get in converting GBP to AUD? a. 739541 b. 1002777.804 c. 416945 d. None e. 1311733.645 How much will he get in converting USD 1000000 to GBP? a. 1311733.645 b. 1002777.804 c. None d. 739541 e. 1352190 Which cross rate should he calculate and compare with actual quotes to make sure that he will get profit a. GBP/AUD b. USD/AUD c.…3. Suppose a Canadian agent (investor) with C$1.0 million is choosing between bank deposits denominated in either euro or Canadian dollars. Also suppose that the (one-year) interest rate paid on the C$ deposits is 1% (0.01) and on the euro deposit is 2% (0.02), the (one-year) forward C$-EURO exchange rate (Fc$/e ) is 1.60 and the current spot rate (Ecs/e ) is 1.65. Based on this information, answer the following questions. (a) What is the forward spread? Is the Canadian dollar at forward premium or discount? And by how much (%)? (b) What is the (hedged = riskless) rate of return on the euro bonds? (c) Based on your answer above, is there an arbitrage opportunity between the two deposits? Explain why or why not. (d) If the spot rate of exchange as well as the interest rates are kept at their current levels (stated above), what will be equilibrium forward rate as implied by the covered interest parity theory ?Analyze the impacts of the economy entering a time of expansion (i.e. "good times") on the market for loanble funds. (Assume that expectations about the future don't change.) Because of the expansion, equilibrium interest rates will and the equilibrium quantity of loanable funds will O decrease ; rise, fall, or not change (ambiguous effect) O increase ; decrease O increase ; rise, fall, or not change (ambiguous effect) rise, fall, or not change (ambiguous effect) ; increase O rise, fall, or not change (ambiguous effect) ; decrease
- (1) Explain the uncovered interest parity condition. (2) Suppose that you have $1 to invest. You have two investment options: one is to buy 1-year U.S. bonds that offer a market interest rate of 8% per year, and the other is to buy 1-year Japanese bonds that pay 12% interest per year. Assume that you decide to buy the Japanese bonds with $1. This time you don't enter into a forward contract to protect your investment from possible fluctuations in the exchange rate. Today's exchange rate is ¥100: $1, and the expected future exchange rate that will prevail one year from today is ¥98: $1. (You can answer this question step by step as follows.) O Calculate the proceeds from investing in the U.S. bonds for one year. ® Calculate the proceeds from investing in the Japanese bonds for one year. ® Convert the yen-denominated proceeds into dollars using the future exchange rate one year later.- 16 (10%) (page 2 of 3)- Google Chrome urses.open.uwi.edu/mod/quiz/attempt.php?attempt3D43724&cmid3D461748&page=D1 Exchange 2020 12015 Mathematical Methods of Economics I | S2 20 Ensure that you show ALL workings. Graphs NOT required. n tyn- A company produces two types of can openers: Model I and Model 2. Each require the use of three machines: A, B and C. Model I requires 2 hours on machine A, 1 hour on machine B and 1 hour on machine C. Model II requires 1 hour on machine A, 2 hours on machine B and 1 hour on machine C.The maximum number of hours available for machine A, B and C are 180, 160 and 100 respectively. The profit on Model I is $4 and Model Il is $6. on Write down the LP model. Identify the coordinates of the extreme points of the feasible region. Paragraph -BIEE W 99+Jane quit her job at IBM where she earned $50,000 a year. She cashed in $50,000 in corporate bonds that earned 10% interest annually to buy a mini-bus. Jane has decided to buy the mini-bus and set up a commuter service between Lincoln and Omaha. There are 1000 people who will pay $400 a year each for the commuter service; $280 from each person goes for gas, maintenance, insurance, depreciation, etc. What are Jane's total revenue? A. $600,000 B. $250,000 C. $400,000 D. $480
- Case studyIn a series of negotiations in late 1998, the UK company GEC Marconi sold its defence interests for US$12 billion – some US$3 billion more than they had been valued several months earlier. This case explains how the company used strategy dynamics and game theory to help improve the outcome.Background – worldwide consolidation in defence industriesWith the end of the Cold War in the early 1990s, many world governments were keen to reduce their defence spending. Moreover, the cost of developing new defence weapons was continuing to rise. The result of falling sales and rising costs was pressure on the world’s leading defence companies to merge and share the costs of development and production. The first merger moves came in the USA, with a shake-out in the mid-1990s that produced three big players: Lockheed Martin, Boeing and Raytheon. Table 5.5 shows the contracts that the leading companies had with the US government in 1997.…Question 4Every country, including Canada and the US, has used foreign borrowing to industrialize and develop its economy. These long-term loans are classified as foreign direct investment (FDI) and portfolio investment. Explain fully the difference between these two types of loans, including implications for risk and sovereignty. Provide examples of each type. Explain as fully as possible how short-term capital flows are different from long-term capital flows. Give examples of each. For your long-term examples try to use different examples, such as real estate, than those you provided for short-term capital flows.All Stafford loans are O only for full-time students for undergraduate and graduate students O subsidized by the government O for undergraduate students