1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Basile [38]
2 years ago
11

Suppose that the pound is pegged to gold at £20 per ounce and the dollar is pegged to gold at $35 per ounce. This implies an exc

hange rate of $1.75 per pound. If the current market exchange rate is $1.80 per pound, how would you take advantage of this situation?
Business
1 answer:
AfilCa [17]2 years ago
4 0

Answer:

The exchange rate implies in exchange rate of $1.75 but current market exchange rate is $1.80 which means that the dollar is undervalued and pound is over valued in the market.

We will buy Dollar in the market and use these dollars to buy gold and then sell this gold in Euros

E.G Buy a $1000 from the market for £555(10,000*1/1.8)

After that we can by 28.5(1000/35) ounces of gold from that and sell the gold for £571(20*28.5). This way we make a profit of £16 (571-555) without taking any risk.

Explanation:

You might be interested in
Consider the following projects. Project CO C1 C2 СЗ C4 C5 A -1,000 +1,000 0 0 0 10 B -2,000 |+1,000 |+1,000 +4,000 +1,000 +1,00
Nuetrik [128]

Answer:

a) $3,458

Explanation:

The net present value is the present value of future cash flows discounted at the firm's weighted average cost of capital(which is the appropriate discount rate in this case) minus the initial investment outlay

cost of equity=risk-free rate+beta*(expected market return-risk free rate)

cost of equity=2.5%+1.5*(12%-2.5%)

cost of equity=16.75%

after-tax cost of debt=5.2%*(1-21%)

after-tax cost of debt=4.11%

WACC=(weight of equity*cost of equity)+(weight of debt*after-tax cost of debt)

weight of equity=value of equity/(value of equity+value of debt)

value of equity=6 billion*$3=$18 billion

value of debt=$5 billion

weight of equity=$18 billion/($18 billion+$5 billion)

weight of equity=78.26%

weight of debt=1-78.26%

weight of debt=21.74%

WACC=(78.26%*16.75%)+(21.74%*4.11%)

WACC=14.00%

present value of a future cash flow=future cash flow/(1+WACC)^n

n is the year in which the cash flow is expected, it is 1 for year 1 cash flow, 2 for year 2 cash flow ,and so on

NPV of project B=1000/(1+14%)^1+1000/(1+14%)^2++4000/(1+14%)^3+1000/(1+14%)^4+1000/(1+14%)^5-2000

NPV of project B=$ 3,458.00  

5 0
2 years ago
Which one of the following statements is correct concerning the payback rule?
Naya [18.7K]

The correct concerning the payback rule is rule is flawed because it ignores all cash flows after some arbitrary point in time.

Payback period in capital budgeting refers to the time required to recover funds spent on an investment or to reach breakeven. Example: If at the beginning of year 1 he invests $1,000 and at the end of year 1 and his second year he earns $500, it pays for itself within 2 years.

The number of years it will take to recover the money invested. For example, if it takes 5 years to recover the cost of an investment, the payback period is he 5 years.

Payback period is defined as the number of years required to recover the original cash investment. In other words, the period during which a machine, plant, or other investment has generated sufficient net income to cover its investment costs.

Learn more about Payback period brainly.com/question/23149718

#SPJ4

7 0
1 year ago
Lark had net income for 2018 of S103,000. Lark had 38,000 shares of common stock outstanding at the beginning of the year and 44
Kryger [21]

Answer:

price earning ratio = 19.44 times

so correct option is c. 19.44

Explanation:

given data

net income =  $103,000

common stock outstanding beginning = 38,000 shares

common stock outstanding ending = 44,000 shares

preferred stock outstanding = 5,000 shares

paid preferred dividends = $29,000

common stock = $35.00 per share

market price preferred stock = $55.00 per share

to find out

Lark's price earnings ratio

solution

first we get here average no of equity share that is

average no of equity share = common stock outstanding beginning + common stock outstanding ending ÷ 2

average no of equity share = \frac{38000+44000}{2}

average no of equity share = 41000 share

and

earning per share will be here as

earning per share = ( net income - paid preferred dividends ) ÷ average no of equity share

earning per share =  \frac{103000-29000}{41000}

earning per share = $1.80

so here price earning ratio will be as

price earning ratio = \frac{market\ price\ common\ share}{earning\ per\ share}

price earning ratio = \frac{35}{1.80}

price earning ratio = 19.44 times

so correct option is c. 19.44

7 0
3 years ago
In this photo, this phase of the moon is called
blondinia [14]

Answer:in this photo, this phase of the moon is called waning crescent.

The next phase will be new Moon.

About 27 days from now the phase will be waning crescent.

Explanation: Just did it on edge 2020 :)

8 0
3 years ago
Read 2 more answers
Identify two components from the business environment and support them with one example of each​
aev [14]
Business environment is simply the environment in which the business operates.

It includes the industry situation, the customers, the suppliers, the demand and supply of products of business, competitive position, government regulations, and everything that affects the business, directly or indirectly.
3 0
1 year ago
Other questions:
  • Explanation of competition and a real life example​
    5·1 answer
  • Jackson's Programming paid its June rent of $500 cash. Demonstrate how to use the accounting equation to record the transaction
    5·1 answer
  • A rumor is circulating that ridicules a new employee, accusing him of having typos in his latest slide presentation. You overhea
    13·1 answer
  • Sujo Ltd. commenced operations in early 2019. The company incurred HK$60,000,000 of costs such as fees to underwriters, legal fe
    11·1 answer
  • Chris Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 5 years to overhaul the
    12·1 answer
  • The cash basis of accounting A : is the method required by generally accepted accounting principles. B : follows the revenue rec
    9·1 answer
  • Agricultural output is a large part of Econland's GDP. Particularly bad weather one year leads to an output that is smaller than
    7·1 answer
  • Smith has applied overhead of $73,000 and actual overhead of $87,600 for the month of November. It applies overhead based on dir
    5·1 answer
  • Rough & Ready Timber Company orally contracts with Shawn for the purchase of five acres of Shawn’s timberland. Shawn makes t
    14·2 answers
  • Jager Inc. holds 30% of the outstanding voting shares of Kinson Co. and appropriately applies the equity method of accounting. A
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!