Toyota's Pass-Through. Assume that the export price of a Toyota Corolla from Osaka, Japan, is ¥2,150,000. The exchange rate is ¥87.58/$. The forecast rate of inflation in the United States is 2.2% per year and in Japan it is 0.0% per year. Use this data to answer the following questions on exchange rate pass-through.
a. What was the export price for the Corolla at the beginning of the year expressed in U.S. dollars?
b. Assuming purchasing power parity holds, what should be the exchange rate at the end of the year?
c. Assuming 100% exchange rate pass-through, what will be the dollar price of a Corolla at the end of the year?
d. Assuming 75% exchange rate pass-through, what will be the dollar price of a Corolla at the end of the year?
In: Finance
On Monday, February 20, you settled the 7.5% Saturn Tech Company’s corporate bonds for $98.75. The maturity date is June 30, 2030, the redemption price is 100, and the coupons are paid twice a year. Calculate the yield to maturity (use whole number percentage and 2 decimals)
In: Finance
The value of shareholder’s equity for ABC Corp amounts to US$100 million. ABC is trading at $200 per share, while the ABC has 2 million shares outstanding. Estimate the price to book ratio of ABC:
| a. | 40x | |
| b. | 4x | |
| c. | 0.4x | |
| d. | 2x |
In: Finance
Bastion Corporation issued $100 million bonds that mature in 30 years and have a 5% coupon rate that is paid annually. If the bonds were sold to yield 5.4%, determine the price of the bonds at the end of year 15.
Multiple Choice
$94,581,667
$95,500,206
$95,958,151
$97,606,824
$98,287,192
In: Finance
A trader has a call option contract to sell 100 shares of a stock for a strike price of $50. What is the effect on the terms of the contract of the following events?
(a) A $5 dividend being paid
(b) A 5-for-4 stock split
(c) A 10% stock dividend being paid.
In: Finance
Stock that doesn't pay a dividend is trading at $5. A riskless bond that will pay $100 after a year is trading at $94. A European call option on the stock with strike price of $60 and one year to maturity is trading at $6.1. Devise an arbitrage strategy and prove that it works in all scenarios.
In: Finance
A trader has a call option contract to sell 100 shares of a stock for a strike price of $50. What is the effect on the terms of the contract of the following events?
(a) A $5 dividend being paid
(b) A 5-for-4 stock split
(c) A 10% stock dividend being paid.
In: Finance
The market demand for peanuts is given by P = 30 - 0.4Q. Weaver is the only supplier of peanuts in the market and they have total fixed costs of $100 and constant marginal costs of $2 per unit. The monopolist's profit-maximizing choice of quantity is _____ units and the profit-maximizing choice of price is $ ______ .
In: Economics
Binding price ceilings have been used to protect consumers from “exorbitant” prices for many products such as petrol and rental accommodation. In practice, however, such a policy quite often leads to making the community worse off. Use an appropriate diagram to discuss this issue. (100 words）
In: Economics
Great Wall Pizzeria issued 10-year bonds with the face value of $100 one year ago at a coupon rate of 6.20 percent. Coupons are paid semiannually. If the YTM on these bonds is 7.4 percent per annum with a semiannual compounding frequency, what is the current bond price?
In: Finance