Cripple Creek Distilleries Inc is an all equity company with 20M shares outstanding. It’s stock last closed at $20. Cripple Creek has too much cash. The CEO, Levon Helm, wants to distribute the excess cash with an open market stock repurchase. He is contemplating buying back $5M worth of shares at a price of $20. […]
Date: September 19th, 2020
What is the term for the conditional mean of the probability distribution of future spot rates? A) the expected swap rate B) the future exchange rate C) the outright rate D) the expected future spot rate ANSWER Answer: D
Date: September 19th, 2020
The efficient market hypothesis states that: A) Requiring firms to issue more stock will reduce volatility. B) Requiring investors to hold securities longer will reduce volatility. C) Electing a pro-business Republican president makes the market more efficient. D) Taxing security returns will raise prices . E) Markets price securities fairly at all times and that […]
Date: September 19th, 2020
In today’s Wall Street Journal, you see the Greek drachma (GRD) quoted at $0.003635. Yesterday, it was quoted at $0.003521. The drachma ________ by ________. A) depreciated; 1.14% B) appreciated; 3.05% C) depreciated; 3.05% D) appreciated; 3.24% E) depreciated; 3.24% ANSWER D
Date: September 19th, 2020
What is the name of the exchange rate specified in the forward contract? A) spot rate B) forward rate C) future exchange rate D) cross-rate ANSWER Answer: B
Date: September 19th, 2020
If you want to hedge and owe a firm a foreign currency in the future, you would A) buy the foreign currency forward. B) sell the foreign currency forward. C) speculate on the possibility to not hedge. D) buy the currency now and deposit into a bank account until needed. ANSWER Answer: A
Date: September 19th, 2020
Slurp Cola Inc is all equity financed and generates perpetual annual EBIT of $600. Assume that the EBIT, and all other cash flows, occur at year end and that we are currently at the beginning of a year. Assume that Slurp has a 100% payout rate, 1,000 shares outstanding, and that shareholders require a return […]
Date: September 19th, 2020
Cyberdyne Systems is a military/defense products company. Cyberdyne Systems is all equity financed. Cyberdyne has 200 million shares outstanding which trade for $20 per share. Cyberdyne’s shareholders require a return of 10%. Omni Defense Products Inc is also a military/defense products company. It’s shares are trading for $35 per share. Omni has 100 million shares […]
Date: September 19th, 2020
Which of the following statements about risk is false? A) Risk is one of the determinants of the required return. B) Risk requires the possibility of at least one outcome less favorable than the expected value. C) Risk requires the possibility of more than one outcome. D) High risk should require low return. […]
Date: September 19th, 2020
As a foreign exchange trade at Deutsche Bank, one of your customers would like a yen quote on Australian dollars. The current spot market rates are ¥101.37-85/U.S.$ and A$1.2924-44/U.S.$. What bid and ask yen cross rates would you quote on spot Australian dollars? What will be an ideal response? ANSWER Answer: By means […]
Date: September 19th, 2020
