1. Chase Manhattan has purchased a 7 million one-year Canadian dollar loan that pays 8.5% interest annually. The spot rate of U.S. dollars for Canadian dollars is 0.70. It has funded this loan by accepting a Euro-denominated deposit for the equivalent amount and maturity at an annual rate of 7%. The current spot rate of U.S. dollars for Euros is 1.25. Note: Banks earn interest on loans and pay interest on deposits.
   1. What is the loan amount in dollars?

2. What is the deposit amount in Euros?

3. What is the interest income earned in US dollars on this one-year transaction if the spot rate of U.S. dollars for Canadian dollars and U.S. dollars for Euros at the end of the year are 0.67 and 1.30, respectively?

4. What is the interest expense in dollars?

2. Green Manufacturing, Inc., plans to announce that it will issue $2,000,000 of perpetual bonds and use these funds to repurchase equity. The bonds will have a 6-percent coupon rate. Green manufacturing currently is an all-equity firm. The current value of Green’s equity is $10,000,000 and there are 500,000 shares outstanding. After the sale of bonds and share repurchase, Green will maintain the new capital structure indefinitely. Under its current capital structure the expected annual pretax earnings for Green are $1,500,000, and these earnings are expected to remain constant into the foreseeable future. Green is in the 40-percent tax bracket.

1. What Green’s weighted average cost of capital before the debt issue?
2. Construct Green’s market-value balance sheet as it looks before the announcement of the debt issue.
3. Construct the market-value balance sheet after the announcement?
4. How many shares of stock will Green retire?
5. Construct the market-value balance sheet after the debt issue and share repurchase are completed.

Bond 1 has a 10% annual coupon rate, $1000 maturity value, n = 5 years, YTM = 10% (pays a $100 annual coupon at the end of each year and $1,000 maturity payment at maturity at the end of year 5). Bond 2 is a zero coupon bond with a $1000 maturity value, and n = 5years; YTM= 10%. (has no coupon payments; only a $1,000 maturity payment paid at maturity at the end of year 5).

What is the price, duration, and modified duration of both bonds?

Calculate the value of a bond that is expected to mature in 13 years with a 1,000 face value. The interest coupon rate is 8%, and the required rate of return is 10%. Interest is paid anually. State whether the bond is selling at a premium or at a discount.

PPG Industries is considering the purchase of a new machine to produce outdoor paint. Machine A costs $3,150,000 and will last for six years. Variable costs are 37 percent of sales, and fixed costs are $290,000 per year. Machine B costs $5,377,000 and will last for nine years. Variable costs for this machine are 32 percent of sales and fixed costs are $210,000 per year. The sales for each machine will be $11.8 million per year. The required return is 10 percent, and the tax rate is 23 percent. Both machines will be depreciated on a straight-line basis to 0 over the duration of the project (machine A over 6 years; machine B – 9 years.). Both machines will be worthless at the end of the project. The company plans to replace the machine when it wears out. Based on costs, which machine should the company choose and why? Please use excel if possible

Route Canal Shipping Company has the following schedule for aging of accounts receivable:

a. Calculate the percentage of amount due for each month.

b. If the firm had $1,512,000 in credit sales over the four-month period, compute the average collection period. Average daily credit sales should be based on a 120-day period.

c. If the firm likes to see its bills collected in 36 days, should it be satisfied with the average collection period?

• Yes

• No

d. Disregarding your answer to part c and considering the aging schedule for accounts receivable, should the company be satisfied?

• Yes

• No

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 8%. The probability distribution of the risky funds is as follows:

The correlation between the fund returns is 0.09.

a-1. What are the investment proportions in the minimum-variance portfolio of the two risky funds. (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

a-2. What is the expected value and standard deviation of its rate of return? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

PLEASE SHOW ALL WORK INCLUDING ALGEBRA STEPS WHEN SOLVING Ws EQUATION THANK YOU

Given the various industries we examined (i.e. agriculture, tobacco, banks, pharmaceuticals, etc.), which industries do you suspect have the highest betas? Which ones have the lowest betas? Provide an economic explanation for your reason. Hint: Talk about the business operations of each industry and how demand for their products/services is affected during up- and down-markets.

1. Fill in the table below for the indifference curve that corresponds to a Utility = 0.05 and an investor risk aversions of A=3 and A=4.