Use the following charts to answer the questions below:

1. For each country, report the stock index values and ex-rates for February, 2019 and February, 2020.

2. Calculate the annual percentage return for each stock market from February, 2019 - February, 2020, measured in local currency. Use the standard percentage return formula: [(P2 - P1)/P1] x 100.

3. For each currency, calculate the annual percentage change from February, 2019 to February, 2020 using the exchange rate exactly as quoted, and for each currency separately, clearly explain in a full sentence or two whether each of the foreign currencies appreciated or depreciated versus the dollar.

4. Calculate the effective, annual US dollar return for a U.S. investor who had invested money in the stock markets of each of the five countries last year (February 2019 - February 2020), using the formula: Effective dollar return = % foreign stock market return +/- %CHG in the foreign currency.

A friend of the CEO of the cable car company of Small Ski Resort asks him why he does not use this opportunity to fire everyone who does not fulfill the requirements of the new situation. Instead of paying for a training program he could just hire new staff. What would the CEO say? What are the advantages for the cable car company of Small Ski Resort to implement a training program instead of hiring new staff?

If a war broke out abroad, it would affect the U.S. economy in many ways.

Use the model of Small Closed and Small open economy to examine each of the following effects of such a war.

What happens to savings, investment, the trade balance, the interest rate, and the exchange rate? (To keep things simple, consider each of the following effects separately.)

a) The U.S. government, fearing it may need to enter the war, increases its purchases of military equipment.

b) Other countries raise their demand for high-tech weapons, a major export of the US.

c) The war makes US firms uncertain about the future, and the firms delay some investment projects.

d) The war makes US consumers uncertain about the future, and the consumers save more in response.

e) Americans become apprehensive about traveling abroad, so more of them spend their vacations in the US.

f) Foreign investors seek a safe haven for their portfolios in the University States

Spire is a nanosatellite and data analysis company based out of San Francisco. The company specialises in gathering unique data from small satellites in a low-earth orbit. Spire collect this data, pull it down and through a network of ground stations, and sell the Spire opened its European headquarters in Glasgow, Scotland. Data, like that provided by Spire’s nanosatellites, can be the key factor in fighting the extreme and unpredictable weather events that cause so much destruction globally.

Scotland has a well-known reputation for providing a first-class welcome to all its visitors and Spire management were very impressed by the warm and open reception they received from the Scottish Government agency. CEO and Co-founder Peter Platzer stated 'Where Scotland won out was the access to risk capital, the flexibility and, importantly, the Scottish Government’s eagerness to support innovative companies – this really stood out here’. His vision when he co-founded Spire was to be able to provide satellite powered data from any location on earth. He also claims that his staff are very pleased; ‘We had a number of overseas staff come here for a temporary position to help set up who have since decided that they want to stay here permanently. Glasgow is a really great place to live and Scotland in general - our people really enjoy being here. The words friendly and hospitable are really not rich enough in meaning to describe the experience of being a part of everyday life here in Scotland’.

As well as the positive welcome and help that they have had to settle into life in Scotland, Spire management also point out that a key factor in their location decision was the access to a talented work force. ‘When we looked at Scottish staff, we found that the passion for what they do, their character and work ethic, is absolutely world-class’.

Questions

1. Why did Spire choose to locate in Scotland?

2. Why do companies set up overseas manufacture and service operations?

3. Are reduced labour costs the main reason for relocation?

Tiner Leasing Company purchased specialized equipment from Fred

Company on December 31, 2019 for $800,000. On the same date, it leased this equipment to Tears Company for 6 years, the useful life of the equipment. The lease payments begin January 1, 2020 and are made every 6 months. Tiner Leasing wants to earn 9% annually on its investment.

   (a) Calculate the amount of each rent. $ __________

   (b) How much interest revenue will Tiner earn in 2020? $ __________

Predict the effect of a bottleneck or founder effect on allelic diversity.

Which of the following is NOT a red flag of related party transaction that may be a sham?

The comparative balance sheets for 2021 and 2020 and the income statement for 2021 are given below for Arduous Company. Additional information from Arduous’s accounting records is provided also.

Additional information from the accounting records:

1. Investment revenue includes Arduous Company’s $10 million share of the net income of Demur Company, an equity method investee.
2. Treasury bills were sold during 2021 at a gain of $4 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.
3. Equipment originally costing $74 million that was one-half depreciated was rendered unusable by a flood. Most major components of the equipment were unharmed and were sold for $15 million.
4. Temporary differences between pretax accounting income and taxable income caused the deferred tax liability to increase by $5 million.
5. The preferred stock of Tory Corporation was purchased for $27 million as a long-term investment.
6. Land costing $48 million was acquired by issuing $24 million cash and a 12%, four-year, $24 million note payable to the seller.
7. The right to use a building was acquired with a 15-year lease agreement; present value of lease payments, $84 million. Annual lease payments of $7 million are paid at the beginning of each year starting January 1, 2021.
8. $62 million of bonds were retired at maturity.
9. In February, Arduous issued dividend (4.8 million shares). The market price of the $5 par value common stock was $7.50 per share at that time.
10. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $11.00 million.

Required:
Prepare the statement of cash flows of Arduous Company for the year ended December 31, 2021. Present cash flows from operating activities by the direct method. (Do not round your intermediate calculations. Enter your answers in millions (i.e., 10,000,000 should be entered as 10.). Amounts to be deducted should be indicated with a minus sign.)

1) You are US company, 500,000 BP (British Pound) payable to UK in one year. Answer in terms of US$.

Information for Forward Contract:

Forward exchange rate (one yr): 1.54 $/BP

Information for Money Market Instruments (MMI):

Current exchange rate: 1.50 $/BP

Investment return at Aerion Fund Management (in UK): 4% annual

Interest rate of borrowing from Bank of America (in USA): 2% annual

Information you need for Currency Options Contract:

Options premium: 0.015 $/BP

Interest rate of borrowing from Bank of America (USA): 2% annual

Allowed to exercise options at 1.54 $/BP

What are the costs of MMI? (Answer in US$ of course. You are US company!)

2) You are US company, 500,000 BP (British Pound) payable to UK in one year. Answer in terms of US$.

Information for Forward Contract:

Forward exchange rate (one yr): 1.54 $/BP

Information for Money Market Instruments (MMI):

Current exchange rate: 1.50 $/BP

Investment return at Aerion Fund Management (in UK): 4% annual

Interest rate of borrowing from Bank of America (in USA): 2% annual

Information you need for Currency Options Contract:

Options premium: 0.015 $/BP

Interest rate of borrowing from Bank of America (USA): 2% annual

Allowed to exercise options at 1.54 $/BP

If the break-even exchange rate for the Currency Options Contract is 1.46 $/BP, and you believe the exchange rate at the time of the payment would be 1.43 $/BP, should you sign the contract?