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klemol [59]
3 years ago
13

Twelve years ago, the Archer Corporation borrowed $6,200,000. Since then, cumulative inflation has been 80 percent (a compound r

ate of approximately 5 percent per year).
a. When the firm repays the original $6,200,000 loan this year, what will be the effective purchasing power of the $6,200,000? (Hint: Divide the loan amount by one plus cumulative inflation.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
b. To maintain the original $6,200,000 purchasing power, how much should the lender be repaid? (Hint: Multiply the loan amount by one plus cumulative inflation.) (Do not round intermediate calculations and round your ans
Business
1 answer:
leonid [27]3 years ago
5 0

Answer:

The effective purchasing purchasing power of the initial loan of $6,200,000 when the firm repays is  $3,444,444  

If the original purchasing power of the $6,200,000 is to be maintained the firm must repay $ 11,160,000

Explanation:

In computing the figures above, I adhered strictly to the hints given in the question the purchasing of the original should be calculated by dividing the original amount by 1 plus cumulative inflation rate of 80% and that the amount should be multiplied by 1 plus cumulative inflation rate to arrive the amount needed as repayment to maintain the purchasing of the initial loan amount.

Find attached for detailed computations

Download xlsx
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3 years ago
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5 0
3 years ago
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A firm wants to use an option to hedge 12.5 million in receivables from New Zealand firms.The premium is $.03. The exercise pric
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Answer:

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So you multiply the 12.5 million by .55 which is the amount you´ll receive, and withdraw form that the premium:

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3 0
3 years ago
Need help on this, i tried so many answers and they were all wrong
aivan3 [116]
What is the question
4 0
3 years ago
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