# final jeopardy answers - Q8[Page 27-5 Interest Rate Parity...

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Q1.) [Page 10-5] re = [D1/(Po(1-F)] Q2.) [Page 10-6] Q3.) [Page 10-4] rs = rRF + β (rM – rRF) or rs = rRF + β (MRP) Q4.) [Page 17-1] (1) pay interest expenses (2) pay down the principal on the debt (3) pay dividends (4) repurchase stock (5) buy non-operating assets; i.e., T-bills or other marketable secs. Q5.) [Page 17-1] (1) cash dividend (2) stock repurchases Q6.) [Page 17-2] treasurey stock Q7.) [Page 28-8] An infinite series of equal payments made at fixed intervals for a specified number of periods (infinite annuity). The present value of a perpetuity is: PV = Payment / Interest rate = PMT / i
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Unformatted text preview: Q8.) [Page 27-5] Interest Rate Parity holds that investors should expect to earn the same return in all countries after adjusting for risk. IRP is expressed as: Forward Exchange Rate = (1 + r host) Spot Exchange Rate (1 + r foreign) Q9.) [Page 21-7] (1) to ensure that inventories needed to sustain operations are available (2) the average length of time between sales and connections Q10.) [Page 12-3] The IRR is defined as the discount rate that equates the present value of a project’s expected cash inflows to the present value of its cost. The equation for calculating the IRR is shown below:...
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