HW Week 7 Questions (10-1; 10-2; 10-4; 10-5 10-6; 11-1; 11-2)
A project has an initial cost of $52,125; expected net cash inflows of $12,000 per year for 8
years, and a cost of capital of 12%. What is the projects NPV? (Hint:
HW Week 6 Questions (8-3; 8-5; 9-2; 9-5; 9-7; 9-8)
Assume that you have been given the following information on Purcell Industries: According to
the Black-Scholes option pricing model, what is the options value? $1.67
HW Week 4 Questions (6-1, 6-2, 6-4, 6-9, 6-11, 7-1, 7-2, 7-12)
An individual has $55,000 invested in a stock with a beta of 0.8 and another $40,000 invested in
a stock with a beta of 1.4. If these are the only two investments i
HW Week 3 Questions (4-1, 4-2, 4-6, 4-8, 4-6 Redone, 5-1, 5-7)
If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in
your account after 5 years?
10000 * (1.1) ^ 5 = 16105.1
HW Week 1 Questions (1-2, 1-3, 1-4, 1-7)
What are the three principal forms of business organization? What are the advantages and
disadvantages of each?
The three main forms of business organization are the proprietorship, the
HW Week 2 Questions (3-6, 3-8, 3-13 a-c)
Donaldson & son has an ROA of 10%, a 2% profit margin, and a return on equity equal to 15%.
What is the company's total assets turnover? What is the firm's equity multiplier?
ROA = Profi
BALANCE OF PAYMENTS
13.2 Balance of Payments Accounting Principles
13.2a Debits and Credits
13.2b Double-Entry Bookkeeping
13.3 The International Transactions of the United States
Case Study 13-1: The M
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TP. H CH MINH
1. Bank A quotes a bid price of $1.52 and an ask price of $1.54 for the British pound. Bank
B quotes a bi
Exchange Rate Systems and Government Intervention
1. A currency board is a system for maintaining the value of the local currency with respect to
some other specified currency. To do this, the cu
1. If the U.S. intervenes in the foreign exchange market by buying U.S. dollars with Japanese yen, then
the U.S. dollar should appreciate against the Japanese yen.
Correct. This would inc
International Flow of Funds
Dumping and copyright piracy can break trade agreements.
A relative increase in a countrys inflation rate will decrease imports
International Fisher Effect
Madura, Chapter 8
Discuss Generalized Fisher Effect (GFE)
Examine International Fisher Effect (IFE)
Study Forward rate as an unbiased
predictor of the future spot rate (UFR).
Explain implications of p
International Financial Markets
1. The most common type of foreign exchange transaction is for immediate exchange at
the so-called forward rate.
Correct. The spot rate is for immediate exchange; the forward rate is for
Foreign Exchange Market and
Madura, Chapter 3 (66-77) &
Chapter 7 (209-217)
Examine the participants in the foreign
Study the size and location of the market
Examine quotation in the spot market
Foreign Exchange Market and International Arbitrage
1. Major trading centres are London, New York, Kyoto, Singapore, Hongkong, Munich and Paris.
2. Wholesale transaction are done between professi
Interest Rate Parity and Purchasing Power Parity
1. According to interest rate parity, if the interest rate in the U.S. is greater than the interest rate
in Canada, then the Canadian dollar forwa
Self-Fulﬁlling Beliefs in Economics and Finance
There are a number of examples of self—fulﬁlling beliefs in economies which make
equilibrium somewhat unstable, since beliefs can change overnight.
If investors believe that th
Accounting and Finance
Accounting and ﬁnance are fundamentally different disciplines. Accounting
is a methodology for summarizing past transactions; while ﬁnance is a
methodology for planning future transactions.
This fundamental difference accounts
Now,consider another problem.
Let us assume that we wish to estimate how long we must wait for payment on invoices to a
prospective new customer, given that its sales equals 2500, its cost of sales percentage is 50
percent, its current lia
Mapping out a solution
Mapping is a method of planning how you will go about solving a problem involving many steps.
Sometimes it is difﬁcult to map from data A into missing quantity B, and it is easier to work
backward, mapping B into A.
Tran Thi Uyen Vy
ID number: 1421295
3-1 BALANCE SHEET
Total assets = $2.500.000
Net plant and equipment = $2.000.000
Notes payable = $150.000
Long term debt = $750.000
Total common equity = $1.500.000
a) Total liabilities and equity
How does a cost-efficient capital market help reduce prices of
goods and services?
The prices of goods and services must cover their costs. Costs
include labor, materials, and capital. Capital costs to a
borrower include a return to the saver who supp