Describe the different types of indirect investments available to investors. Explain why this type of investment is a better alternative for some investors than buying securities directly.

A bank has issued a six-month, $2.0 million negotiable CD with a 0.50 percent quoted annual interest rate (i_{CD, sp}).

a. Calculate the bond equivalent yield and the EAR on the CD.
b. How much will the negotiable CD holder receive at maturity?
c. Immediately after the CD is issued, the secondary market price on the $2 million CD falls to $1,998,500. Calculate the new secondary market quoted yield, the bond equivalent yield, and the EAR on the $2.0 million face value CD.

Use 365 days in a year

You are bullish on Amazon’s stock (AMZN) which is currently selling for $1596.50. You have decided to buy a 6-month call option with a strike price of $1,625. It costs $50.60 per share to buy the option. Assume the 6-month risk-free rate is 1% per annum with continuous compounding. a.Draw the profit and payoff function for the long call option at expiration? (Provide labels for the axes and label a point on the functions above, below and at the strike) b.Note each contract is for 100 call options. Calculate what the payoff and profit at expiration is if the spot price is _______.

i.$1,550

ii.$1,700

iii.$1,675.60

c.Draw the profit and payoff function for the short call option at expiration? (Provide labels for the axes and label a point on the functions above, below and at the strike)

Martin Enterprises needs someone to supply it with 133,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $950,000 to install the equipment necessary to start production; you’ll depreciate this cost straight-line to zero over the project’s life. You estimate that, in five years, this equipment can be salvaged for $109,000. Your fixed production costs will be $525,000 per year, and your variable production costs should be $18.15 per carton. You also need an initial investment in net working capital of $106,000. If your tax rate is 23 percent and you require a return of 11 percent on your investment.

A. Assuming the price per carton is $27.60, what is the NPV of this project?

B. Assuming the price per carton is $27.60, find the quantity of cartons per year you can supply and still break even.

C. Assuming the price per carton is $27.60, find the highest level of fixed costs you could afford each year and still break even.

The current spot price of Amazon stock is $1,823 the current 1-year forward price is $1,944. The current 1-year risk free rate is 6.5% per annum with semiannual compounding. If there is a $20 transaction fee for the combination of all transactions made, paid today, can you make an arbitrage profit with 100 shares? If there is an arbitrage how much would you make? Otherwise prove that there is not an arbitrage.

Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $5 million of retained earnings with a cost of rs = 15%. New common stock in an amount up to $7 million would have a cost of re = 19%. Furthermore, Olsen can raise up to $3 million of debt at an interest rate of rd = 11% and an additional $3 million of debt at rd = 13%. The CFO estimates that a proposed expansion would require an investment of $7.8 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

What exactly is the capital structure of an organization? Additionally, what do we mean by the cost of capital? When considering capital projects, are there ways of measuring risks and costs associated?

1. What is the net operating profit after taxes (NOPAT) for 2018? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answer to one decimal place.

   $   million

2. What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answers to one decimal place.

   2018 $   million

   2017 $   million

3. What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answers to one decimal place.

   2018 $   million

   2017 $   million

4. What is the free cash flow for 2018? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answer to one decimal place.

   $   million

5. What is the ROIC for 2018? Round your answer to one decimal places.

   %

6. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answers in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answers to one decimal place.

   After-tax interest payment	$   million
   Reduction (increase) in debt	$   million
   Payment of dividends	$   million
   Repurchase (Issue) stock	$   million
   Purchase (Sale) of short-term investments	$   million

You have just been hired as a financial analyst for Barrington Industries. Unfortunately, company headquarters (where all of the firm's records are kept) has been destroyed by fire. So, your first job will be to recreate the firm's cash flow statement for the year just ended. The firm had $100,000 in the bank at the end of the prior year, and its working capital accounts except cash remained constant during the year. It earned $5 million in net income during the year but paid $800,000 in dividends to common shareholders. Throughout the year, the firm purchased $5.4 million of machinery that was needed for a new project. You have just spoken to the firm's accountants and learned that annual depreciation expense for the year is $440,000; however, the purchase price for the machinery represents additions to property, plant, and equipment before depreciation. Finally, you have determined that the only financing done by the firm was to issue long-term debt of $1 million at a 6% interest rate. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet What was the firm's end-of-year cash balance? Recreate the firm's cash flow statement to arrive at your answer. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar, if necessary. $

What is the connection between the value of shares and dividends? How are they both different?

Seattle Health Plans currently use zero-debt financing. It's operating income (EBIT) is $1 million, and it pays taxes at a 40% rate. It had $5 million in assests, and because it is all equity financed, $5 million in equity. Suppose the firm is considering replacing half of its equity financing with debt financing bearing an interest rate of 8%.

A. What impact would the new capital structure have on the firm's net income, total dollar return to investors and ROE?

B. Redo the analysis, but now assume that the debt financing would cost 15%

C. Return to the initial 8% interest rate. Now assume that EBIT could be as low as %500,000 or as high as $1.5 million. There remain a 60% chance that EBIT would be $1 million.

D. Repeat the analysis required for part a, but now assume that Seattle Health Plan is a not-for-profit corporation and pays no taxes. Compare the results with those obtained in Part a.

the rio rancho corporation financed a $10 million expansion by borrowing $2 million from israel discount bank at an interest rate of 4.75% per year. in addition, the company issued bonds to the public with a face value of $8 million that have both a coupon rate and yield to maturity of 6.75%. if the company's tax rate is 38%, calculate the WACC of this expansion

1. MXN is the symbol for the Mexican Peso. MXN/USD .05. A 2020 Toyota Supra costs $49,000 in the U.S. and 1,200,000 Mexican Pesos in Mexico. Based on this information, please answer the following questions.

1. What is USD/MXP in real currency exchange rate terms?
2. Is the USD over or undervalued?
3. Where am I better off buying the Toyota Supra? In Mexico or in the U.S.?
4. Based on the official/nominal MXN/USD currency exchange rate, what would I expect to pay for the Supra in Mexico?
5. Based on the real cost of the same car in both countries, if Purchasing Power Parity (PPP) were to hold true, what would USD/MXN be?
6. Based on the nominal currency exchange rate, if Purchasing Power Parity (PPP) were to hold true, what would I expect to pay for the Supra in the U.S.?

2) Lizzy owns a costume jewelry store in South Africa. She imports most of her jewelry from Zambia. She reads in the newspaper that Zambia is expected to lower interest rates. Is she better off waiting until Zambia actually lowers interest rates before she imports more jewelry from Zambia or should she import more jewelry now, before interest rates decline in Zambia? Explain your answer.

Problem 4-03 (Algorithmic)

The employee credit union at State University is planning the allocation of funds for the coming year. The credit union makes four types of loans to its members. In addition, the credit union invests in risk-free securities to stabilize income. The various revenueproducing investments together with annual rates of return are as follows:

The credit union will have $2.3 million available for investment during the coming year. State laws and credit union policies impose the following restrictions on the composition of the loans and investments.

• Risk-free securities may not exceed 30% of the total funds available for investment.
• Signature loans may not exceed 10% of the funds invested in all loans (automobile, furniture, other secured, and signature loans).
• Furniture loans plus other secured loans may not exceed the automobile loans.
• Other secured loans plus signature loans may not exceed the funds invested in risk-free securities.

How should the $2.3 million be allocated to each of the loan/investment alternatives to maximize total annual return? Round your answers to the nearest dollar.

What is the projected total annual return? Round your answer to the nearest dollar.

$