Question 1
Finance Use the following information for questions 1-4: Coca-Cola currently has a stock price of $42. It also has eight options available with the following Expiration Date, Strike Price (Exercise Price), and Option Price. For Example, you can buy a Sept 40 Call for $4.78 (or you could sell it for $4.78). The risk free rate between now and Sept is 2% while the risk free rate between now and Dec is 3%. Expiration Strike Discounted Call Put Month Price Value Price Price Sept 40 39.22 4.78 2 Sept 45 44.12 4 Dec 40 38.83 5.67 3.50 Dec 45 43.69 5 1. Suppose you sold the Dec 45 Put option and the stock price ends up being $41. How much is your total profit or loss (including the original sale of the option)? a) $1 loss b) $0 c) $1 profit d) $2 profit e) $3 profit 2. What is the Time Value of the Sept 40 Put option? a) $0 b) $1 c) $1.69 d) $2 e) $3 3. Using Put-Call Parity, what is the value of the Sept 45 Call option? a) $0.99 b) $1.88 c) $2.01 d) $2.12 e) $3.25 4. How could you earn a risk-free profit using the Dec 40 options? a) Buy the Stock and the Put, Sell the Bond and the Call b) Buy the Stock and the Call, Sell the Bond and the Put c) Buy the Bond and the Put, Sell the Stock and the Call d) Buy the Bond and the Call, Sell the Stock and the Put 5. If you __________, then you may be forced to buy the underlying stock. a) Buy a Call Option b) Buy a Put Option c) Sell a Call Option d) Sell a Put Option 5. Lower risk free rates results in __________ Put Option prices and ______ Call Option Prices. a) Higher, Higher b) Higher, Lower c) Lower, Lower d) Lower,Higher 6. Which Statement is correct? a. Dealers and Brokers make money by setting up transactions and are the go betweens in the derivatives market. b. A firm should always hedge in order to reduce risk whenever they can c. Speculators do not mind losing money as long as they are reducing their risk d. Dealers and Brokers try to find mispricings in the market where they can buy at a low price and simultaneously sell at a high price without taking on any risk. 7. Which statement regarding executive stock options is correct? a) They are short term and usually expire after one year. b) They should reduce agency costs by making managers act like shareholders c) They are included as compensation expense on the income statement. d) Managers can sell the options on an exchange 8. Which of the following statements are correct? a) Forward contracts are standardized and trade on an exchange b) Profits and Losses on Futures contracts are marked to market on a daily basis. c) Delivery of the assets almost never occurs in the forward market d) Futures contracts allow you to buy or sell individual stocks for a preset price on the expiration date. 9. Even if a firm has no assets or liabilities in foreign countries and has no cash flows denominated in foreign currencies, then it might still face ____________. a) Translation Exposure b) Transaction Exposure c) Economic Exposure d) Exchange Rate Exposure 10. Which of these should cause the dollar to appreciate? a) A decline in foreign demand for US goods and services b) An increase in US demand for foreign goods and services c) A decline in foreign demand for US financial assets d) A decline in US demand for foreign financial assets Use the following information for questions 11-14 Current Exchange Rates: $1.25 = 1 Euro and .625 Pounds = $1 Current one-year Inflation Rates: 6% in England, 2% in Europe, and 4% in the US 11. What is the exchange rate for Dollars per Pound? a) .5 dollars per pound b) .781 dollars per pound c) .8 dollars per pound d) 1.28 dollars per pound e) 1.6 dollars per pound 12. What should the cross rate be between Euros and Pounds? a) .5 pounds per euro b) .781 euros per pound c) .92 pounds per euro d) 1.28 euros per pound e) 2 euros per pound 13. If interest parity holds true, what is the expected exchange rate between euros and dollars one year from now? a) .637 Dollars per Euro b) .7846 Euros per dollar c) 1.2317 Dollars per Euro d) 1.2745 Euros per Dollar e) 1.57 Dollars per Euro 14. The Euro is expected to __________ against the Dollar and ____________against the Pound. a) Appreciate, Appreciate b) Appreciate, Depreciate c) Depreciate, Depreciate d) Depreciate, Appreciate 15. In order for the international parity conditions to hold, all countries must have the same _____________. a) Nominal Inflation Rate b) Nominal Risk-Free Interest Rate c) Real Exchange Rate d) Real Risk-Free Interest Rate 16. Which statement is FALSE? a. Interest Rate and Currency are two types of Swaps b. The two main types of derivatives are options and futures (or forwards) c. Collateralized Debt Obligations are basically insurance policies on debt d. The coupon rate on Inverse Floaters goes up when interest rates fall. 17. Which statement is TRUE? a. England has given up its own currency and uses the Euro b. If you are demanding a foreign currency, then you are willing to supply the domestic currency c. The effect of exchange rates on a firm is called synergy d. Interest Rate parity says that a country?s risk free rate is made up of their expected inflation and a real rate. e. The Japanese currency is called the Yuan 18. A(n) _____________ involves creating a new company out of part of your company and then selling shares of the new company to the public. a) Joint Venture b) Leveraged Buyout c) Stock Swap d) SpinOff 19. Which of these is a repellant used to avoid becoming a takeover target? a) Greenmail b) Pacman c) White Knight d) Golden Parachute 20. In a(n) ___________, the acquiring firm does not assume the liabilities of the target firm. a) Consolidation b) Stock Swap c) Equity Carveout d) Asset Purchase 21. Suppose that prior to a merger the stock price of the target company was $50 and the stock price of the acquiring company was $40. If the acquiring firm agrees to pay 1.5 share of their stock for every share of the target firms stock, then what premium are they offering? a) 10% b) 20% c) 25% d) 33% e) 50% 22. You need a barrel of oil next month. You could either buy the oil today and keep it for a month, wait and buy the oil next month when you need it, you could enter into a futures contract to buy oil at the current futures price $82, or you can pay $3 for a call option that gives you the right to buy oil for $80. The current spot price is $78 and the risk free rate is 2%, and carrying costs are $2. If the price ends up being $84 next month, then you should have ______________. a) Waited to buy the oil b) Entered into a futures contract c) Bought a call option d) Buy the oil today and store it for a month. 23. You just paid $3 for a call option that gives you the right to buy oil for $80. The current spot price is $78. If the price ends up being $84 next month, then what was your total profit or loss from buying the option? a) Lost $4 b) Lost $2 c) Made $1 d) Made $4 24. In the currency markets, $1 = 0.75 British pound and 1 Euro = $1.25. Wolverine Cola produces cherry cola in England at a cost of 0.9 British pound per unit. The product is sold in France for 1.5 euros. In terms of U.S. dollars, how much profit is Wolverine realizing on each unit sold? a. $0.37 b. $0.675 c. $0.875 d. $1.04 25. Which of the following statements is NOT CORRECT? a. Any bond sold outside the country of the borrower is called an international bond. b. Foreign bonds and Eurobonds are two important types of international bonds. c. Foreign bonds are bonds sold by a domestic borrower but denominated in a different currency than the country in which the issue is sold. d. The term Eurobond applies to any bonds that are denominated in a currency that differs from the country in which the issue is sold. 26. Which statement is FALSE? a. Hedging is when a company uses derivatives to reduce risk b. Derivatives are any security whose value depends on the value of some other asset c. The Futures Price changes everyday d. Forward contracts have less default risk than futures because the exchange acts as the counterparty for all trades e. Futures contracts are an agreement to either buy or sell an underlying asset for a prespecified price on a prespecified date. 27.Which Statement is FALSE? a. Synergy is when the combined company is worth more than individual parts b. Horizontal Mergers are between two competing firms while vertical mergers are between suppliers and customers c. A Leveraged Buyout is when a company sells a part of itself to another company d. Most Hostile takeovers are done through a tender offer. 28. Which statement is FALSE? a. Transaction Exposure is when the dollar price of the good may change due to changes in the exchange rate b. Floating exchange rates are determined by the supply and demand for the currency c. A multinational is a company that is located and operates in more than one company d. Dollarization is when a countries currency is floating e. An exchange rate is the price of one currency in terms of another. 29. Which Statement is FALSE? a. Time Value is the amount by which the price of an option exceeds its intrinsic value b. Time Value Decays over time c. The Strike Price is the price at which a call option holder can buy the underlying asset d. A decrease in the risk free rate is likely to lead to a decrease in the value of a put option e. The Time Value of an option is at its highest when the spot price equals the strike price 30. Which Statement is FALSE? a. An option is in the money as long as its intrinsic value is positive. b. The spot price is the price to buy or sell for immediate trade. c. The strike price of an option can change everyday d. The intrinsic value of a call option is either $0 or the Stock price ? Strike price, whichever is greater 31. Which statement is FALSE? a. Options sold without stock to back them up are called covered calls b. Situations in which aggregate (total) risk can be reduced by derivatives are called natural hedges c. The effect that exchange rate changes have on a firm is called Economic Exposure d. Speculating involves taking on risk in order to make money
Question 2
BBA 4751 Business Ethics 1. Conduct an online search of CEO salaries. If you search ?do CEO?s get paid too much? on your favorite search engine there is a wealth of information. Select an online article or blog. Take a stance on this subject and construct a brief argument of whether or not you believe CEO?s get paid too much. Please be sure to cite your source at the bottom of your essay. 2. Review pages 83 ? 86 in the course text that talks about virtue ethics. Do you believe that virtue (character) can be taught or acquired through a person?s lifetime? Give a specific example of a character trait to support your point 11. Conduct online research on monitoring employees in the workplace. Select an internet article and answer the following questions: 1. Briefly summarize the article 2. Pick a side and agree or disagree with the article and elaborate on your point of view. Remember to cite your article in APA format at the bottom of your essay 12. Go to The Occupational Safety and Health Administration web site (http://osha.gov/). There is a section called ? News? where you can find multiple articles. Select an article relating to workplace safety and answer the following questions: 1. Briefly summarize the article 2. What alternatives could the place of business have taken in order to avoid penalties. Remember to cite your article in APA format at the bottom of your essay,At lease 200 words please. Thanks.
Question 3
Braddock Industries is considering investing in a new manufacturing plant. The plant requires an item of equipment that costs $200,000. In addition, Braddock will spend $10,000 on shipping costs and $30,000 on installation charges. The equipment will be housed in a building currently owned by the company. The building was bought at a cost of $75,000 five years ago, but it could be sold now for $125,000. Similar buildings in the area are leasing for $5,000 per month. You estimate that if the new plant is constructed, the company will increase its inventories by $25,000, while accounts payable also will rise by $5,000. New sales from the plant are estimated to be 120,000 units per year, at a price of $3.50 per unit. Variable costs are expected to total 60% of sales, while fixed costs are estimated at $20,000 per year. The plant has an estimated economic life of 4 years, after which time it will be scrapped for $25,000 (excluding the building). Depreciation will be calculated using the 3-year MACRS rates of 33%, 45%, 15%, and 7% for the first through the fourth year, respectively. Braddock Industries? marginal tax rate is 40%, and its cost of capital is 10%. Should the plant be built? (Would need excel answer/explanation for comprehension)
Question 4
An alternate exercise and problem set is available on the text website: www.mhhe.com/spiceland6e P 18-1 Various stock transactions; correction of journal entries LO4 Part A During its first year of operations, the McCollum Corporation entered into the following transactions relating to shareholders' equity. The corporation was authorized to issue 100 million common shares, $1 par per share. Required: Prepare the appropriate journal entries to record each transaction. p. 1055 Jan. 9 Issued 40 million common shares for $20 per share. Mar. 11 Issued 5,000 shares in exchange for custom-made equipment. McCollum's shares have traded recently on the stock exchange at $20 per share. Part B A new staff accountant for the McCollum Corporation recorded the following journal entries during the second year of operations. McCollum retires shares that it reacquires (restores their status to that of authorized but unissued shares). Required: Prepare the journal entries that should have been recorded for each of the transactions P 18-8 Share issue costs; issuance; dividends; early retirement LO3 LO4 LO7 During its first year of operations, Cupola Fan Corporation issued 30,000 of $1 par Class B shares for $385,000 on June 30, 2011. Share issue costs were $1,500. One year from the issue date (July 1, 2012), the corporation retired 10% of the shares for $39,500. Required: 1. Prepare the journal entry to record the issuance of the shares. 2. Prepare the journal entry to record the declaration of a $2 per share dividend on December 1, 2011. 3. Prepare the journal entry to record the payment of the dividend on December 31, 2011. 4. Prepare the journal entry to record the retirement of the shares. (Note: You may wish to compare your solution to this problem with that of Problem 14-16, which deals with parallel issues of debt issue costs and the retirement of debt.)
Question 5
Content Assistive Technology Tips [opens in new window] Instructions Description You will have ONE attempt to complete the test. You can save some answers and log off and then log back in at another time and continue to take the test. Once you hit the ?Save and Submit? button, you will no longer have access to the test. You have until 11 PM on Sunday, July 28th to complete and submit Quiz 3. LATE SUBMISSIONS WILL NOT BE ACCEPTED so please plan carefully! Quiz 3 is based on Chapter 4 material. If you have any questions pertaining to the Quiz format, email me directly at d..8@nova.edu Instructions Multiple Attempts Not allowed. This Test can only be taken once. Force Completion This Test can be saved and resumed later. Question Completion Status: Question 1 How many years it will take to grow your money from $4,140 to $9,250 if you can earn an interest of 7% compounded quarterly? Note: Do not write "years" in your answer. Simply write the number in the answer box. Answer 1 points Question 2 Assume interest rate of 4%. A company receives cash flows of $81,403 at the end of years 4, 5, 6, 7, and 8, and cash flows of $289,772 at the end of year 10. Compute the future value of this cash flow stream. Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal points. Answer 1 points Question 3 Consider a 10-year loan with monthly payments at 10%. If the loan amount is $250,000, compute the Interest paid during the 6th year. Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. Answer 1 points Question 4 Today, you are purchasing a $3,881 10-year car loan at 13 percent. You will pay annually at the end of each year. What is the amount of each payment? Answer 1 points Question 5 If you put $700 in a savings account with a 10% nominal rate of interest compounded monthly, what will the investment be worth in 21 months (round to the nearest dollar)? Answer a. $827 b. $1,176 c. $833 d. $828 e. $770 1 points Question 6 The Perpetual Life Insurance Co is trying to sell you an investment policy that will pay you and your heirs $13,896 per year forever. Suppose the Perpetual Life Insurance Co. told you the policy costs $186,428. At what interest rate would this be a fair deal? Just enter the number in percentages up to 2 decimal points. Do not enter % in the answer box. Answer 1 points Question 7 Kelly starting setting aside funds 3 years ago to buy some new equipment for her firm. She has saved $4,490 each quarter and earned an average rate of return of 8 percent. How much money does she currently have saved for this purpose? Answer 1 points Question 8 How many years it will take you to quadruple (means 4 times) your money if you can earn 3.08% each year? Note: Do not write "years" in your answer. Simply write the number in the answer box. Answer 1 points Question 9 Assume interest rate of 9%. Suppose that you receive $73,621 at the end of each year for 4 years. Suppose that this cash flow starts at the end of the fourth year. Compute the present value. Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal points. Answer 1 points Question 10 Gertrude Carter and Co. has an outstanding loan that calls for equal annual payments of $14,903 over the 10-year life of the loan. The original loan amount was $100,000 at an APR of 8 percent. How much of the third payment is interest? Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal points. Answer 1 points Question 11 What is the effective rate of 13% compounded monthly? Do not enter the symbol % in your answer. Simply enter the answer in percentages rounded off to two decimal points. Answer 1 points Question 12 How many years it will take to grow your money from $4,118 to $6,536 if you can earn an interest of 6% compounded monthly? Note: Do not write "years" in your answer. Simply write the number in the answer box. Answer 1 points Question 13 What is the future value of quarterly payments of $582 for 6 years at 5 percent? Answer 1 points Question 14 Assume interest rate of 4%. A company receives cash flows of $559 at the end of year 5, $242 at the end of year 7, and $962 at the end of year 10. Compute the future value of this cash flow stream. Do not enter the symbol $ in your answer. Simply enter the answer rounded off to two decimal points. Answer 1 points Question 15 How many years it will take you to double your money if you can earn 11% each year, given that compounding is quarterly? Note: Do not write "years" in your answer. Simply write the number in the answer box. Answer 1 points Question 16 023A:If you can double your money in 7 years, what is the implied annual rate of interest, given that compounded semi-annually? Note: give your answer in percentages. Note: Do not put % sign in your answer. Simply write the number in percentages in the answer box. Answer 1 points Question 17 026:Say, you deposit $4,770 in a bank for 19 years. What is the amount you will have in the bank at the end of 19 years if interest of 4 % for first 6 years and interest of 7 % for the remaining years? Note: Do not put $ sign in your answer. Simply write the number in the answer box. Answer 1 points Question 18 If you can triple your money in 7 years, what is the implied rate of interest? Note: Do not put % sign in your answer. Simply write the number in percentages in the answer box.. Answer 1 points Question 19 How many months it will take to grow your money from $4,781 to $7,279 if you can earn an interest of 15% compounded monthly? Note: Do not write "months" in your answer. Simply write the number in the answer box. Answer 1 points Question 20 Barrett Pharmaceuticals is considering a drug project that costs $192,279 today and is expected to generate end-of-year annual cash flows of $13,125, forever. At what discount rate would Barrett be indifferent between accepting and rejecting the project? Just enter the number in percentages up to 2 decimal points. Do not enter % in the answer box. Answer 1 points Question 21 What is the future value of $2,721 invested for 14 years at 17% if interest is compounded quarterly? Note: Do not put $ sign in your answer. Simply write the number in the answer box. Answer 1 points Question 22 How much do you need to invest today in order to have $5,977 at the end of 16 years if you are sure to earn an interest at the rate of 13%? Note: Do not put $ sign in your answer. Simply write the number in the answer box. Answer 1 points Question 23 027:Say, you deposit $3,531 in a bank for 17 years. What is the amount you will have in the bank at the end of 17 years if interest of 6 % compounded monthly for first 8 years and interest of 7 % compounded quarterly for the remaining years? Note: Do not put $ sign in your answer. Simply write the number in the answer box. Answer 1 points Question 24 What is the future value of $846 invested for 23 years at 10% if interest is compounded semi-annually? Note: Do not put $ sign in your answer. Simply write the number in the answer box. Answer 1 points Question 25 What is the future value of $4,402 for 8 years at 3 percent if interest is compounded semi-annually? Note: Do not enter "$" in your answer. Simply write down the number that you get as your answer. Answer 1 points Question 26 The ABC Company is considering a new project which will require an initial cash investment of $5,692. The project will produce no cash flows for the first 5 years. The projected cash flows for years 6 through 9 are $2,889, $4,419, $4,463, and $5,459, respectively. If the appropriate discount rate is 12%, compute the NPV of the project. Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. Answer 1 points Question 27 If the effective rate is 15%. What is the nominal rate if compounding is daily. Do not enter the symbol % in your answer. Simply enter the answer in percentages rounded off to two decimal points. Answer 1 points Question 28 What is the future value of annual payments of $2,727 for 17 years at 7 percent? Answer 1 points Question 29 How much do you need to invest today in order to have $652 at the end of 11 years if you are sure to earn an interest at the rate of 7%, if interest is compounded quarterly? Note: Do not put $ sign in your answer. Simply write the number in the answer box. Answer 1 points Question 30 What should you be willing to pay in order to receive $687 annually forever, if you require 11% per year on the investment? Just enter the number up to 2 decimal points. Do not enter $ in the answer box. Answer 1 points Question 31 How much do you need to invest today in order to have $5,156 at the end of 22 years if you are sure to earn an interest at the rate of 7%, if interest is compounded monthly? Note: Do not put $ sign in your answer. Simply write the number in the answer box. Answer 1 points Question 32 The ABC Company is considering a new project which will require an initial cash investment of $17,248. The projected cash flows for years 1 through 4 are $7,945, $8,617, $9,024, and $5,467, respectively. If the appropriate discount rate is 4%, compute the NPV of the project. Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. Answer 1 points Question 33 What is the future value of $4,678 invested for 10 years at 14% if interest is compounded semi-annually (twice a year)? Note: Do not put $ sign in your answer. Simply write the number in the answer box. Answer 1 points Question 34 In order to buy a house, you take a loan of 100,000 at 7.5% for a period of 13 years. Compute the balance remaining at the end of 5 years. Do not enter the symbol $ in your answer. Enter your answer as a positive number. Simply enter the answer rounded off to two decimal points. Answer 1 points Question 35 If you can double your money in 22 years, what is the implied annual rate of interest, given that compounded in quarterly? Note: give your answer in percentages. Note: Do not put % sign in your answer. Simply write the number in percentages in the answer box. Answer 1 points Question 36 If you receive $308 at the end of each year for the first three years and $619 at the end of each year for the next three years. What is the present value? Assume interest rate is 5%. Hint: This is an uneven cash flow problem. Use the CF function and solve for NPV to get the answer. Just enter the number up to 2 decimal points. Do not enter $ in the answer box. Answer
