When does delivery occur on a 90-day forward contract? A) in 90 days corresponding to two business days preceding the third Wednesday of the month B) immediately but the contract is not closed for 90 more days C) in 90 days corresponding to the calendar date of the spot value date D) two business days […]
Date: September 19th, 2020
One of the major reasons for the existence of the forward market is to ________. A) provide a location for all currency traders to assemble and trade B) manage currency risk especially risk associated with a transaction C) hedge transactions involving foreign currency that occurred in the past D) prevent default in the transaction […]
Date: September 19th, 2020
Initek Co’s stock trades for $12.50. Initek has too much cash. The CEO, Bill Lumberg, wants to distribute the excess cash with an open market stock repurchase. He is contemplating buying back $5.45M worth of shares at a price of $12.50. Initek is an all equity company with 20M shares outstanding. Pete Gibb owns 2 […]
Date: September 19th, 2020
If the USD is selling at a discount relative to the yen in the forward market, is the forward price of JPY/USD larger or smaller that the spot price of the JPY/USD? A) larger B) smaller C) indeterminate D) the same ANSWER Answer: B
Date: September 19th, 2020
Suppose the spot rate and forward rate for the British pound are $1.4248 and $1.4179 respectively. Assume the forward pound is selling at a 1.94% annualized discount, what is the number of days of the forward contract? A) 180 days B) 120 days C) 90 days D) 60 days ANSWER Answer: C
Date: September 19th, 2020
The Mountain Jam Company purchased a machine 5 years ago for $70,000. It has an estimated life of 7 years from the time of purchase and is expected to have zero salvage value at the end of 7th year. The old machine can be sold today for $60,000. A new machine can be purchased for […]
Date: September 19th, 2020
Climax Motors Corp is an all equity company with 40M shares outstanding. Climax’s stock trades for $25. Climax has too much cash. The CEO, Trudy Ryder, wants to distribute the excess cash with an open market stock repurchase. She is contemplating buying back $10.9M worth of shares at a price of $25. Ricky Bobby owns […]
Date: September 19th, 2020
If the exchange rate makes foreign goods ________ expensive, demand will increase and imports are likely to ________. A) less; fall B) less: rise C) more; fall D) more; rise ANSWER B
Date: September 19th, 2020
CN Railways is North America’s fifth largest railway. Use the financial information in the table to calculate CN’s maximum sustainable growth rate. CN Railway Company As of December 31, Year 10 ROE 8.62% ROA 3.02% Net Profit Margin 9.35% Total Asset Turnover 0.32 Dividend Payout Rate 30% A) 2.2% B) 3.1% C) 6.4% D) 7.0% […]
Date: September 19th, 2020
Why are exchange rates important? A) They affect the relative price of domestic and foreign products. B) They show how much stronger one country is than the other. C) They allow you to buy products cheaper in foreign markets. D) They provide important information about the current economic status. ANSWER A
Date: September 19th, 2020
