Looking back on 4 March 2008 when the interest rate was set at 7.25% by RBA (Reserve Bank Australia), however since then RBA gradually reduced the interest rate to its lowest 1% on 3 July 2019. Present an overview on the expectations or motivations behind such interest rate cut by RBA? (summary) [Note: In the early 1990s the interest rate was 17.5%, you don’t need to go back such distant past, your analysis should focus between 2008 to 2019] Talk about the impact on the economy after the interest rate changed. Summary of 400 words

Can you please help me with this overview? It is for my work

3-4 There are four countries (Japan, Sweden, Denmark and Switzerland) have negative interest rates. What could be the expectations/ motivations to drop interest rate below zero? Mention how it will affect the country’s growth and how it affects each country individually.

Could you please give me a summary of the solution to each question so that I may expand on this. It is for my current job

An Apple annual coupon bond has a coupon rate of 6.9%, face value of $1,000, and 4 years to maturity. If its yield to maturity is 6.9%, what is its Modified Duration? Answer in years, rounded to three decimal places.

Part 1: Assume that the average variance of return for an individual security is 50 and that the average covariance is 10. What is the expected variance of an equally weighted portfolio of 5,10,20,50, and 100 securities?

Part 2: In part 1, how many securities need to be held before the risk of a portfolio is only 10% more than minimum?

Explain how a company may utilize a net capital loss for tax purposes.

After this is explained, give an example you’ve seen or read.

Provide your reference.

The $800 million loan carried a 6% interest rate and had the following repayment of principal schedule:

Year 1: $132 million

Year 2: $32 million

Year 3: $57 million

Year 4: $82 million

Year 5: $82 million

Year 6: $415 million

What is the present value of the term loan? What would the present value be if the compnay had chosen permanent debt instead of a term loan?

In December 2019, Bob Prescott, the controller for the Blue Ridge Mill, was considering the addition of new on-site long-wood woodyard. The addition would have two primary benefits: to eliminate the need to purchase short-wood from an outside supplier and create the opportunity to sell short-wood on the open market as a new market for Worldwide Paper Company (WPC). The new woodyard would allow the Blue Ridge Mill not only to reduce its operating costs but also to increase its revenues. The proposed woodyard will utilise new technology that allows tree-length logs, called long-wood, to be processed directly, whereas the current process required short-wood, which had to be purchased from the Shenandoah Mill. This nearby mill, owned by a competitor, has excess capacity that allows it to produce more short-wood than it needs for its own pulp production. The excess is sold to several different mills, including the Blue Ridge Mill. Thus, adding the new long-wood equipment would mean that Prescott would no longer need to use the Shenandoah Mill as a short-wood supplier and that the Blue Ridge Mill would instead compete with the Shenandoah Mill by selling on the short-wood market. The question for Prescott was whether these expected benefits were enough to justify the $18m capital outlay plus the incremental investment in working capital over the six-year life of the investment. Construction would start within a few months, and the investment outlay would be spent over two calendar years: $16m in 2020 and the remaining $2m in 2021. When the woodyard begins operating in 2021, it would significantly reduce the operating costs of the mill. These operating savings would come mostly from the difference in the cost of producing short-wood on-site versus buying it on the open market and were estimated to be $2m for 2021 and $3.5m per year thereafter. Prescott also planned on taking advantage of the excess production capacity afforded by the new facility by selling short-wood on the open market as soon as possible. For 2021, he expected to show revenues of approximately $14m, as the facility came on-line and began to break into the new market. He expected shortwood sales to reach $20m in 2022 and continue at the $20m level through 2026. Prescott estimated that the cost of goods sold (before including depreciation expense) would be 75%. In addition to the capital outlay of $18m, the increased revenues would necessitate higher levels of inventories and accounts receivable. Therefore the amount of working capital investment each year would equal 15% of incremental sales for the year. At the end of the life of the equipment, in 2026, all the networking capital on the books would be recoverable at cost fully. Taxes would be paid at a 30% rate, and the equipment depreciation is to be calculated on a straight-line basis over the six-year life to zero balance. However, the new equipment is estimated to have a salvage value (scrap value) of $3m at the end of its life. WPC’s accountants have told Prescott that depreciation charges could not begin until 2021, when all the $18m had been spent and the equipment is in service. WPC has a company policy to use 15% as the hurdle rate for such investment opportunities. The hurdle rate is based on the study of the company’s cost of capital conducted 5 years ago. Required:

a. Outline reasons why Prescott may be uneasy using the 15% hurdle rate for a discount rate.

b. Perform a sensitivity analysis on NPV of the project on the following scenarios :

(i) Sales increases/decreases by 10%.

(ii) Cost of capital increases/decreases by 10% . Comment on the feasibility of the project under each scenario. c. The global paper and pulp industry, one of the world largest industries, has been grow ing slowly, at a rate much less than expected over the last 20 years. The price chart below show s that the Products Industry Index on average grew at around 2.5% per year over the last 20 years , while lumber futures contract prices have negative growth. Some analysts believe that the industry needs more structural change to counter disruption of technology and tackle social impacts due to climate change. Identify and analyze three qualitative risk factors (ie . factors which are unquantifiable at present) faced by the industry. How would Bob Prescott consider these factors in evaluating the feasibility of the new on - site long - wood woodyard ?

Question 1 Suppose a forex trader makes the following statement, “liquid currencies would be more volatile than the illiquid ones.” Explain why would you agree or disagree with the trader’s statement.

Question 2 A forex trader has $1,000,000 (or its Swiss franc equivalent) to use in a forex speculation. The spot exchange rate is USD1.0524/CHF and the relevant 3-month interest rates (un-annualized) in the US and Switzerland are 3.8% and 5.3%, respectively. Suppose the trader can make a precise forecast and the future spot rate in 90 days will be USD1.0627/CHF, explain how the trader can perform arbitrage. How much arbitrage profit can the trader obtain? Explain your working

Suppose you receive the following quotes from a dealer. The bid and ask prices for USD are MYR4.15 and MYR4.18, respectively. The same dealer also quotes the bid and ask prices for GBP to be at MYR5.10 and MYR5.15. Given the following quotes, calculate the USD cost of obtaining GBP10,000.

A. $8,058

B. $8,196

C. $12,200

D. $12,410

Suppose you get the following exchange rate quotes: MYR4.4365/USD, MYR3.34/AUD, and USD0.74/AUD. Determine the triangular arbitrage profit that is possible if you have MYR1,000,000 to perform arbitrage.

A. MYR17,063

B. MYR17,210

C. MYR17,359

D. MYR17,590

My pension plan will pay me$5,000 once a year for a 10 -year period. The first payment will come in exactly five years. The pension fund wants to immunize its position.

a. What is the duration of its obligation to me? The current interest rate is 8% per year.

b.If the plan uses 3-year and 30-year zero-coupon bonds to construct the immunized position, how money ought to be placed in each bond?

c.What will be the face value of the holdings in each zero?

8. Tim wants to buy an apartment that costs $2,225,000 with an 85% LTV mortgage. Tim got a 30 year, 3/1 ARM with an initial teaser rate of 3.75%. The reset margin on the loan is 300 basis points above 1 year CMT. There are no caps. The index was 1% at the time of origination. Tim also had to pay 6.5 points for this loan.

Compute the true APR (annualized IRR) for this loan.

Risk, Return, and the Capital Asset Pricing ModelAs a first day intern at Tri-Star Management Incorporated the CEO asks you to analyze the following in-formation pertaining to two common stock investments, Tech.com Incorporated and Sam’s Grocery Cor-poration. You are told that a one-year Treasury Bill will have a rate of return of 5% over the next year. Also, information from an investment advising service lists the current beta for Tech.com as 1.68 and for Sam’s Grocery as 0.52. You are provided a series of questions to guide your analysis.

Estimated Rate of Return

Economy             Probability          Tech.com            Sam’s Grocery                   S&P 500

Recession            30%                        –20%                                     5%                          – 4%

Average               20%                        15%                                        6%                          11%

Expansion            35%                        30%                                        8%                          17%       

Boom                    15%                        50%                                        10%                        27%

1. Which of these two-stock portfolios do you prefer? Why

What future amount of money will be accumulated 10 years from now by investing $1500 now plus $5500 4 years from now at 6% interest compounded semi-annually?