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Romashka [77]
3 years ago
8

Suppose the U.S. yield curve is flat at 3% and the euro yield curve is flat at 4%. The current exchange rate is $1.35 per euro.

What will be the swap rate on an agreement to exchange currency over a 3-year period? The swap will call for the exchange of 2.1 million euros for a given number of dollars in each year. (Do not round intermediate calculations. Enter your answer in millions rounded to 4 decimal places.)
Business
1 answer:
Debora [2.8K]3 years ago
3 0

Answer:

2.7814 millions per year

Explanation:

The rate that is determined by the contracting parties of a swap is known as swap rate.

The swap rate is decided by the receiver and paid by the payer in order to compensate the uncertainty bear by the receiver related to the fluctuations in floating rate.

Amount Delivered = Forward Exchange Rate * Exchange Amount

Year 1  

= $1.35 * ( 1.03 / 1.04 ) * Euro 2.1 million

= $2.8077 millions

Year 2

= $1.35 * ( 1.03 / 1.04 )∧2 * Euro 2.1 million

= $2.7807 millions

Year 3  

= $1.35 * ( 1.03 / 1.04 )∧3 * Euro 2.1 million

= $2.7540 millions

Now Swap per year =

[F/(1+0.3) + F/(1+0.03)∧2 + F/(1+0.03)∧3 ]= [ $2.8077 ( 1+0.03)∧2 + $2.7807 (1+0.03) + $2.7540 ] / ( 1+0.03)∧3

= F [ 2.8286 ] = 7.8674

F = 2.7814 millions per year

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Answer:

Hawks

Explanation:

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To maintain inflation in control, a hawk normally prefers reasonably high interest rates. In other terms, redskins are less worried with global development just like they are with downturn risk brought to pressure by rising inflation. 

Thus, from the above we can conclude that the correct answer is hawk.

6 0
2 years ago
The pre-tax cost of debt for a firm: is based on the yield to maturity on the firm's outstanding bonds. is equal to the coupon r
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Answer:im sorry i dont know

Explanation:

8 0
3 years ago
A company had stock outstanding as follows during each of its first three years of operations: 2,500 shares of 10%, $100 par, cu
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Answer:

See the attached photo for the completed the schedule.

Explanation:

Note: See the attached photo for the completed the schedule.

In the attach excel file, the following formulae and calculations are used:

Peferred stock dividend per share = Total cumulative preferred stock dividend paid in a year / Number of cumulative preferred shares

Common stock dividend per share = Total common stock dividend paid in a year / Number of common shares

Total cumulative preferred stock dividend = Number of cumulative preferred stock * Par value * Dividend rate = 2,500 * $100 * 10% =  2,500 * $100 * 10% = $25,000

Outstanding cumulative preferred stock dividend in Year 1 = Total cumulative preferred stock dividend - Total cumulative preferred stock dividend paid in Year 1 = $25,000 - $10,000 = $15,000

Outstanding cumulative preferred stock dividend in Year 2 = Outstanding cumulative preferred stock dividend in Year 1 = $15,000

Total cumulative preferred stock dividend paid in Year 3 = Total cumulative preferred stock dividend + Outstanding cumulative preferred stock dividend in Year 2 = $25,000 + $15,000 = $40,000

Total common stock dividend paid in Year 3 = Dividend distributed in Year 3 - Total cumulative preferred stock dividend paid in Year 3 = $60,000 - $40,000 = $20,000

6 0
3 years ago
Multiple Product Performance Report Storage Products manufactures two models of DVD storage cases: regular and deluxe. Presented
Pavlova-9 [17]

Answer:

<u>Flexible budget performance report for the July manufacturing activities</u>

Direct Materials :                                         $62,000

Lumber :

Regular ($6.00 × 5,000) $30,000

Deluxe ($9.00 × 2,000) $18,000

Assembly kit :

Regular ($2.00 × 5,000) $10,000

Deluxe ($2.00 × 2,000) $4,000

Labor :                                                            $30,000

Regular ($4.00 × 5,000) $20,000

Deluxe ($5.00 × 2,000) $10,000

Variable overhead :                                      $15,000

Regular ($2.00 × 5,000)  $10,000

Deluxe ($2.50 × 2,000)   $5,000

Fixed manufacturing overhead                  $13,000

Total                                                             $120,000

Explanation:

A Flexed Budget is a Master budget that has been adjusted to reflect the Actual Level of Operation.

8 0
3 years ago
Finding the required interest rate: Your parents will retire in 18 years. They currently have $250,000, and they think they will
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Answer:

i= 8% annual compunded

Explanation:

Giving the following information:

Your parents will retire in 18 years. They currently have $250,000, and they think they will need $1,000,000 at retirement.

We need to calculate the interest rate required to reach the $1 million goal in 18 years without any additional deposit.

FV= PV*(1+i)^n

Isolating i:

i= [(FV/PV)^(1/n)] - 1

i= [(1,00,000/250,000)^(1/18)] - 1= 0.08

i= 8% annual compunded

7 0
3 years ago
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