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SVEN [57.7K]
3 years ago
14

Suppose the U.S. yield curve is flat at 4% and the euro yield curve is flat at 3%. The current exchange rate is $1.50 per euro.

What will be the swap rate on an agreement to exchange currency over a 3-year period
Business
1 answer:
lianna [129]3 years ago
3 0

Answer:

$4.24287 million per year

Explanation:

Missing question:  The swap will call for the exchange of 1 million euros for a given number of dollars in each year.

For structured three separate forward contracts of the exchange of currencies, the forward price could be found as follows

Forward exchange rate * $1 million error = Dollar to be received

Year 1 = 1.50*(1.04/1.03) * 1 million euros

Year 1 =  1.514563106796117 * 1 million euros

Year 1 =    $1.5145 million

Year 2 = 1.50*(1.04/1.03)^2 * 1 million euros

Year 2 = 1.529267602978604 * 1 million euros

Year 2 = $1.5293 million

Year 3 = 1.50*(1.04/1.03)^3 * 1 million euros

Year 3 = $1.5441 million

The number of dollars each year is determined by computing the present value:

= 1.5145 / 1.04 + 1.5293 /(1.04)^2 +1.5441 / (1.04)^3

= 1.45625 + 1.41392 + 1.3727

= $4.24287 million per year

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When an accelerated depreciation method is used to calculate depreciation expense: Multiple Choice the accumulated depreciation
erastovalidia [21]

Answer:

the net book value of the asset halfway through its useful life will be less than if straight-line depreciation is used.

Explanation:

Let me use an example to illustrate this.

An asset has a useful life of 4 years. It costs $1000. It has a salvage value of 0

If the straight line depreciation method is used , the depreciation expense every year = $1000/ 4 = $250

The net book value halfway through its useful life = $1000 - ($250 x 2) = $500

If double declining method is used, the depreciation expense in the first year would be = 2/4 x $1000 = $500

The net book value at the beginning of year 2 = $1000 - $500 = $500

Depreciation expense in year 2 = 2/4 x $500 = $250

The net book value at the beginning of year 3 = $500 - $250 = $250

We can see that the net book value halfway through the useful is lower when double declining depreciation method is used

4 0
3 years ago
A transfer payment is a payment made by a. firms, but not in exchange for capital equipment. b. foreigners, but not in exchange
s344n2d4d5 [400]

Transfer payment is a payment made by : Government, but not in exchange for a currently produced good or service.

<h3>What is transfer payment?</h3>

Transfer payment refers to a public expenditure, which is made purposely for unemployment compensation other than procuring goods or services.  It is money or other aid that is given by a government without any good or service in return.

Examples of transfer payments include:

  • Welfare
  • Financial aid
  • Social security
  • Government subsidies for certain businesses.

Hence, transfer payment is a payment made by government, but not in exchange for a currently produced good or service.

Learn more about transfer payment here: brainly.com/question/7176766

8 0
2 years ago
An increase in input prices causes:___________
Svetach [21]

Answer: the market supply to shift inward, driving the equilibrium price higher.

Explanation:

An increase in input prices will result into a rise in the production costs. This will result in a leftward shift of the supply curve.

Therefore, the market supply will shift inward, driving the equilibrium price higher. This simply means that there will be lesser supply of the product and hence, increase in price.

5 0
2 years ago
Summarize and contrast how work-based learning benefits the following groups: students, employers, and schools
Misha Larkins [42]
Students learn about how different work places work,and about what sort of work they might enjoy. employers get to "preview" people who might make good workers when they leave school. Schools learn what workplaces are needing from students and can adjust their their curricula to be more relevant.<span />
3 0
3 years ago
The discount rate assigned to an individual project should be based on: Group of answer choices the firm's weighted average cost
Inessa05 [86]

Answer:

none of the choices are correct

Explanation:

When the discount rate assigned for an individual project then it should be based on the risk i.e attached to the fund use needed by the project

There were various cases when a risky firm invested in a less risky project also if the same cost of capital is used so the firm could alter the decision of an investment in a negative manner

Therefore none of the choices are correct

3 0
3 years ago
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