FINC 305: Solutions to Chapter 21 Tutorial Questions
3. Leading and Lagging. How can an MNC implement leading and lagging techniques to
help subsidiaries in need of funds?
ANSWER: A subsidiary in need of funds would receive cash inflows from another
subsi
FINC 305: Questions for Chapter 6 Tutorial Questions
2. Intervention with Euros. Assume that Belgium, one of the European countries that uses
the euro as its currency, would prefer that its currency depreciate against the dollar. Can
it apply central bank
FINC 305: Questions for Chapter 3 Tutorial
10. Indirect Exchange Rate. If the direct exchange rate of the euro is $1.25, what is the euros
indirect exchange rate? That is, what is the value of a dollar in euros?
11. Cross Exchange Rate. Assume Polands cur
FINC 305: Questions for Chapter 4 Tutorial Questions- week 3
1.
Percentage Depreciation. Assume the spot rate of the British pound is $1.73 (GBP/USD). The expected spot
rate one year from now is assumed to be $1.66. What percentage depreciation does this
FINC 305: Questions for Chapter 3 Tutorial Questions- week 2
10. Indirect Exchange Rate. If the direct exchange rate of the euro is $1.25, what is the euros indirect
exchange rate? That is, what is the value of a dollar in euros?
USD/EUR = 1/$1.25 = 0.80
FINC 305: Questions for Chapter 7 Tutorial
2. Locational Arbitrage. Assume the following information:
Bid price of New Zealand dollar
Ask price of New Zealand dollar
Beal Bank Yardley Bank
$.401
$.398
$.404
$.400
Given this information, is locational arbi
FINC 305: Questions for Chapter 5 Tutorial
6. Hedging With Currency Options. When would a U.S. firm consider purchasing a call option on
euros for hedging? When would a U.S. firm consider purchasing a put option on euros for
hedging?
7. Speculating With C
FINC 305: Questions for Chapter 8 Tutorial
8. Comparing Parity Theories. Compare and contrast interest rate parity
(discussed in the previous chapter), purchasing power parity (PPP), and the
international Fisher effect (IFE).
ANSWER: Interest rate parity
FINC 305: Questions for Chapter 4 Tutorial
1. Percentage Depreciation. Assume the spot rate of the British pound is $1.73. The expected spot
rate one year from now is assumed to be $1.66. What percentage depreciation does this reflect?
2. Inflation Effect
FINC 305: Questions for Chapter 7 Tutorial
2. Locational Arbitrage. Assume the following information:
Bid price of New Zealand dollar
Ask price of New Zealand dollar
Beal Bank Yardley Bank
$.401
$.398
$.404
$.400
Given this information, is locational arbi
SEMESTER 1
2017
BSNS 114
FINANCIAL
DECISION MAKING
BSNS 114
TOPIC 1
Introduction to Financial Decision Making
1
Critical concepts
Introduction to class
Class set up/administrative details
What is Financial Decision Making
The Objective in Financial Deci
Semester 1
2017
BSNS 114
FINANCIAL
DECISION MAKING
TOPIC 4
Bonds
1
Critical concepts
Choices of financing: bonds
Common features of bonds
Common classifications of bonds
Bond values, and why do they fluctuate?
Bond ratings, and what do they mean?
Yield cu
BSNS114
Topic 7: Capital Budgeting 2
Free Cash Flow Estimation
1
Introduction and overview
Recap:
Capital budgeting looks at how company invests in real assets to maximise firm
value.
It is a process of analysing projects and investment opportunities an
BSNS114
Topic 9:
Risk, Return, Portfolios,
Diversification, and the CAPM
1
Introduction and overview
Recap:
Different investment asset classes inherently have their
own level of risk.
Investors require greater returns for taking greater risk.
We develo
BSNS114
Topic 6: Capital Budgeting 1
Decision Criteria Rules
1
Introduction and overview
Recap:
The goal of a financial manager is to maximise firm value.
To do that, companies rely on capital from investors to buy assets.
In a way, companies have to b
Semester 1
2017
BSNS 114
FINANCIAL
DECISION MAKING
TOPIC 3
Time value of money (TVM) II
1
Critical concepts
The way to annualize interest rates: Effective annual rate (EAR)
Annual percentage rate (APR)
Multiple cash flow: A Perpetuity
Multiple cash flow:
BSNS114
Topic 8:
Investment Market History,
Risk and Return
1
Introduction and overview
Recap:
Company relies on investors capital to fund projects.
How do companies determine the fair rate of return to
investors?
This rate of return is the discount ra
BSNS114
Topic 10:
Cost of Capital
1
Introduction and overview
Recap:
Corporations need capital to buy assets.
Corporations source capital from bondholders and
shareholders.
What is the fair rate of return corporations should be
offering to satisfy the
Semester 1
2017
BSNS 114
FINANCIAL
DECISION MAKING
TOPIC 2
Time Value of Money I
1
Critical concepts
Cash flow and assets
Time value of money: Future Value (FV)
Time value of money: Present Value (PV)
Finding how many periods it takes an investment to gro
BSNS114
Topic 11:
Debt in Capital Structure
Why it matters
1
Introduction and overview
Recap:
Equity financing means issuing new shares of common
stocks, at the expense of giving up private ownership.
Debt financing means corporations can borrow money
w
CHAPTER 5
Risk and
Return
SOLUTIONS MANUAL
Overview
This chapter focuses on the fundamentals of the risk and return relationship of assets
and their valuation. For the single asset held in isolation, risk is measured with the
probability distribution and
Semester 2 2010
BUSINESS FINANCE
EXAMINATION MARKING SCHEDULE
DATE: TUESDAY 16TH NOVEMBER 2 - 5.10 PM
TIME ALLOWED: 3 HOURS
(plus an extra 10 minutes for reading this paper)
During the reading time you may write notes on the examination paper
but you may
School of Business
Student Name/ID: _
New Zealand Diploma in Business
Bachelor of Applied Management
NZDB603 Business Finance
AMIF603 Introduction to Finance
Practice Test Marking Guide
Modified Semester One 2012
Instructions:
Show all your calculations
S