Answer:
The loss of the financial institution is $413,000
Explanation:
Let's say that after 3 years the financial institution will receive:
0.5 * 10% of $10million
= 0.5 * 0.1 * 10000000
= $500,000
Then, they will pay 0.5 * 9% of $10M
= 0.5 * 0.09 * 10000000
= $450,000
Therefore, their immediate loss would be $500000 - $450000
= $50000.
Let's assume that forward rates are realized to value the rest of the swap.
The forward rates = 8% per annum.
Therefore, the remaining cash flows are assumed that floating payment is
0.5*0.08*10000000 =
$400,000
Received net payment would be:
500,000-400,000= $100,000. The total cost of default is therefore the cost of foregoing the following cash flows:
Year 3=$50,000
Year 3.5=$100,000
Year 4 = $100,000
Year 4.5= $100,000
Year 5 = $100,000
Discounting these cash flows to year 3 at 4% per six months, the cost of default would be $413,000
Answer:
Any type of government policy that restricts free trade and the movement of capital can trigger the aforementioned consequences. Thus, the limitation of companies to obtain economic benefits can make them decide to close their activities, leaving employees on the street (increasing unemployment), reducing the country's economic production (causing the country's real GDP to decrease), and ultimately, generating monetary lags due to lack of economic production, generating devaluations that lower the international price level of the country's products.
Answer:
C) abandon the production of jam to fully specialize in the production of peanut butter and then trade with Company Q for jam.
Explanation:
According to different theories about trade specialization, a company or even a country should specialize in producing only those products that they can make better than their competition, i.e. have a comparative or absolute advantage in their production.
In this case, since Company R has a comparative advantage in the production of peanut butter, it should specialize in producing only that. In case they need jam, they should trade with Company Q in order to get some jam. Eventually Company Q will only produce jam since they have a comparative advantage in jam production.
Its called Generally accepted accounting principals
