List some of the changes that can occur late in life, which affect living arrangements. How many are positive changes? How many are negative changes? In what way?

If we want to assess changes in the real economic activity in an economy, why do we use changes in real GDP for finding an answer, instead of changes in nominal GDP?

BL lives in the US and has $800,000 surplus funds that he wants to invest for one year in any currency. He receives the following quotes from a commercial bank:

Spot rate= 1 British Pound: $50-55

One-year forward rate= 1 British Pound: $58-64

One-year US interest rate= 6%

One year UK interest rate= 1%

(i) With supporting calculations, advise BL whether covered interest arbitrage is worthwhile.

(ii) Would your advice differ, if transaction costs in respect of the covered interest arbitrage amount to $5,000?

(iii) Using the interest rate parity model, calculate the interest differential between the two countries.

BL lives in the US and has $800,000 surplus funds that he wants to invest for one year in any currency. He receives the following quotes from a commercial bank:

Spot rate= 1 British Pound: $50-55

One-year forward rate= 1 British Pound: $58-64

One-year US interest rate= 6%

One year UK interest rate= 1%

(i) With supporting calculations, advise BL whether covered interest arbitrage is worthwhile.

(ii) Would your advice differ, if transaction costs in respect of the covered interest arbitrage amount to $5,000?

(iii) Using the interest rate parity model, calculate the interest differential between the two countries.

Boeing imported a Rolls-Royce jet engine for £5 mil payable in one year
• The US interest rate 6.00% per annum
• The UK interest rate 6.50% per annum
• The Spot exchange rate $ 1.80/£ today
A. The company decides to use options to hedge the risk of pound exchange one year later. What kind of options should the company buy? Put or Call?

B. Assume the strike price of the option is $1.82/£ with a premium of $.02/£ paid today. What is the dollar cost one year later if the spot rate then is 1.60, 1.80 and 2.00 respectively?
C. How could Boeing use money market to hedge the risk? Please provide all details (7 points)

Boeing imported a Rolls-Royce jet engine for £5 mil payable in one year
• The US interest rate 6.00% per annum
• The UK interest rate 6.50% per annum
• The Spot exchange rate $ 1.80/£ today
A. The company decides to use options to hedge the risk of pound exchange one year later. What kind of options should the company buy? Put or Call?

B. Assume the strike price of the option is $1.82/£ with a premium of $.02/£ paid today. What is the dollar cost one year later if the spot rate then is 1.60, 1.80 and 2.00 respectively?
C. How could Boeing use money market to hedge the risk? Please provide all details (7 points)

Brief down in at least 200 words of what do you think about the following summary of an article related to the impact of COVID-19 on mergers and acquisitions. Include your personal views about the following article summary statement.

The article first opens up talking about the effect that COVID-19 has already had on the economy and businesses whether it meant them closing for good, furloughing their employees or consumer spending declining tremendously. Richard D. Harroch, David A. Lipkin, and Richard V. Smith, the authors of this piece state that mergers and acquisitions (M&A) have recovered from economic crisis in the past such as the “dot-com bubble” in 2000-2002 as well as the Great Recession of 2007-2009, but they believe that this time it may be a lot different. Coronavirus isn’t just making an impact on the financial system but also the way deals are having to be made. With the majority of businesses working from home or remote locations, effect use of technology and techniques become critical as the environment has changed. Later in the article, M&A deal activity and how it has changed since the beginning of the pandemic is discussed. It is stated that in the first quarter merger and acquisition levels have fallen by more than fifty percent and most of the transactions from that quarter were done before the crisis became global. The writers also believe that these transactions have slowed down because companies that are usually strategic buyers were having to focus on the future health of the company and not so much about growth. Moving along they also talked about the changes that would need to be made to ensure that these deals could get completed. This article has shown how big of an effect that COVID-19 has had on businesses and mergers or acquisitions in the past six months or so.

The following selected transactions were completed by Capers Company during October of the current year:

Journalize the entries to record the transactions of Capers Company for October. Refer to the Chart of Accounts for exact wording of account titles.

JOURNAL

ACCOUNTING EQUATION

Miltons Ltd is a company based in Germany and is specialised in the production of a wide range of mobility scooters. Miltons Ltd exports its production to a retailer in the UK. The Management Board of Miltons Ltd is considering the budget for the coming year. The table below provides the original budget:

However, Benjamin Hans the Director of Sales suggests that if the price of the scooters were reduced by 20%, then he estimates that sales volume would go up by 25%.

Rebecca Eldridge, the Director of Marketing who is based in the UK, has a different opinion. She believes that the best way to increase sales is to find new distributors. She believes that to increase sales by 25% the company needs an additional marketing push costing €200,000.

The board has asked for some figures and advice to help it in deciding which of the three strategies to adopt:

1.          Remain with the original budget
2.          Adopt Benjamin’s
3.          Adopt Rebecca’s

(Each alternative should be considered independently.

Question 1 continues on next page

1. Presenting your answer in a table, use the Cost-Volume-Profit analysis model to determine :

(i)The profit

(ii)The contribution margin ratio (c/s ratio)

(iii) The breakeven point in €’s

(iv) The margin of safety (as a percentage of sales revenue)

(v) The sales level in number of units that would be required if the company wished to make a profit of €1,200,000                     

2. State and critically analyse FIVE assumption of the Cost-Volume-Profit analysis.
3. Critically Evaluate the figures that you have calculated for each strategy in part (a) above, and recommend a strategy for the Board to adopt. Ensure that you fully justify your answer.
4. Explain the difference between fixed costs, variable costs and semi variable costs giving examples of each.

Purchase-Related Transactions Using Perpetual Inventory System

The following selected transactions were completed by Capers Company during October of the current year:

Required:

Journalize the entries to record the transactions of Capers Company for October.

For a compound transaction, if an amount box does not require an entry, leave it blank.