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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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Oriole Company sells merchandise on account for $7800 to Sunland Company with credit terms of 2/13, n/30. Sunland Company return
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Answer:

a. $6468

Explanation:

Calculation for the amount of the check

Based on the information given we were told that Oriole Company sells merchandise on account for the amount of $7800 to Sunland Company with credit terms of 2/13, n/30 in which Sunland Company returns the amount of $1200 of merchandise that was damaged which means that the amount of the check will be calculated as:

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7 0
2 years ago
Compute the payback for each of these two seperate investments:
fredd [130]

Answer:

a. 2.23

b. 3.21

Explanation:

a. Answer to Part A

Payback Period = Investment / Annual Cash Inflow

= 250000 / 112115

= 2.23

Answer to Part B

Payback Period = Investment / Annual Cash Inflow

= 200000 / 62375

= 3.21

Working Note

<em>Particulars                Case A     Case B </em>

After Tax Income  72115         39000

Add: Depreciation  40000       23375

Cash Inflow             11,2115         62375

<em>Particulars              Case A           Case B </em>

Cost of Machine     250000        200000

Less: salvage Value  10000         13000

Depreciable Value   240000        187000

Life of the Asset           6                  8

Annual Depreciation 40000         23375

8 0
3 years ago
All of the following costs are likely to decrease as a result of better quality except:
swat32

Answer:

The correct answer is (d)

Explanation:

Better quality can help to reduce many costs such as customer’s dissatisfaction cost, inspection cost and warrant and service cost. When customers don't like the quality of the product they are likely to buy the same product from somewhere else that is the dissatisfaction cost. Still, maintenance cost is likely to incur no matter how good the quality is. Maintenance cost helps to keep the product clean and fresh for long-term use.

5 0
3 years ago
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