Questions from General Finance

Q: On February 3, 2016, the Burlington Western Company plans a

On February 3, 2016, the Burlington Western Company plans a commercial paper issue of $25 million. The firm has never used commercial paper before but has been assured by the firm placing the issue th...

Q: Calculate the effective cost of the following trade credit terms when payment

Calculate the effective cost of the following trade credit terms when payment is made on the net due date: a. 2/10, net 30 b. 3/15, net 30 c. 3/15, net 45 d. 2/15, net 60

Q: Suppose 90-day investments in Europe have a 5 percent annualized

Suppose 90-day investments in Europe have a 5 percent annualized return and a 1.25 percent quarterly (90-day) return. In the United States, 90-day investments of similar risk have a 7 percent annualiz...

Q: A McDonald’s Big Mac costs 2.44 yuan in China but

A McDonald’s Big Mac costs 2.44 yuan in China but costs $4.20 in the United States. Assuming that purchasing-power parity (PPP) holds, how many Chinese yuan are required to purchase 1 U.S. dollar?

Q: Compute the indirect quote for the spot and forward Canadian dollar,

Compute the indirect quote for the spot and forward Canadian dollar, yen, and Swiss franc contracts.

Q: You own $10,000. The dollar rate in Tokyo

You own $10,000. The dollar rate in Tokyo is 216.6743. The yen rate in New York is given in the preceding table. Are arbitrage profits possible? Set up an arbitrage scheme with your capital. What is t...

Q: If a credit manager experienced no bad-debt losses over the

If a credit manager experienced no bad-debt losses over the past year, would this be an indication of proper credit management? Why or why not?

Q: Suppose 1 year ago, Miller Company had inventory in Britain valued

Suppose 1 year ago, Miller Company had inventory in Britain valued at 1.5 million Swiss francs. The exchange rate for dollars to Swiss francs was 1 franc = 1.15 dollars. Today, the exchange rate is 1...

Q: At present, 10-year Treasury bonds are yielding 4%

At present, 10-year Treasury bonds are yielding 4% while a 10-year corporate bond is yielding 6.8%. If the liquidity-risk premium on the corporate bond is 0.4%, what is the corporate bond’s default-ri...

Q: At present, the real risk-free rate of interest is

At present, the real risk-free rate of interest is 2%, while inflation is expected to be 2% for the next 2 years. If a 2-year Treasury note yields 4.5%, what is the maturity-risk premium for this 2-ye...